TIDMPDL
RNS Number : 8672A
Petra Diamonds Limited
17 September 2018
17 September 2018 LSE: PDL
Petra Diamonds Limited
("Petra", "the Company" or "the Group")
Preliminary Results Announcement for the Year ended 30 June 2018
(unaudited)
Petra Diamonds Limited announces its preliminary results
(unaudited) for the year ended 30 June 2018 ("the Year" or "FY
2018").
Note: Unless stated otherwise, the financial results in this
announcement are adjusted to exclude the results of KEM JV, which
has been reclassified as a discontinued operation for FY 2018 and
FY 2017. An appendix has been included on page 25 to show
operational results prior to its reclassification, for reference
only.
Financial Highlights
-- Revenue up 25% to US$495.3 million (FY 2017: US$394.8 million).
-- Adjusted EBITDA(3) up 37% to US$195.4 million (FY 2017:
US$142.6 million); adjusted EBITDA margin of 39% (FY 2017:
36%).
-- Profit from mining activities up 33% to US$205.1 million (FY 2017: US$153.9 million).
-- Previously reported Koffiefontein impairment charge of US$66 million.
-- Total loss on discontinued operations relating to KEM JV of
US$104.3 million (US$52.0 million impairment passed in H1 FY 2018,
further impairments of US$40.7 million in H2 FY 2018, and a trading
loss of US$11.6 million for the Year).
-- Net loss after tax of US$203.1 million (FY 2017 net profit
after tax: US$20.7 million), including KEM JV.
-- Adjusted EPS(6) from continuing operations: 0.50 US$ cents
per share (FY 2017: 5.50 US$ cents per share).
-- Basic loss per share from continuing operations: 15.85 US$
cents per share, as a result of Koffiefontein impairment charges
(FY 2017 basic profit per share from continuing operations: 3.14
US$ cents per share).
-- Adjusted operating cashflow(13) up 7% to US$157.0 million (FY
2017: US$147.0 million), despite the negative impact of the blocked
Williamson parcel and overdue VAT receivables in Tanzania.
-- Net debt reduced to US$445.7 million (US$520.7 million net of
diamond debtors of US$75.0 million) further to the receipt of
Rights Issue net proceeds (30 June 2017: US$522.7 million (US$555.3
million net of diamond debtors of US$32.6 million)).
-- Excluding the effect of cash inflow from the Rights Issue,
net debt reduced to US$615.7 million at 30 June 2018 from a peak of
US$644.7 million at 31 December 2017.
-- Depreciation increased to US$128.0 million (FY 2017: US$63.3
million) due to the commissioning of new infrastructure, coupled
with accelerated depreciation of US$25.2 million relating to old
mining areas at Cullinan and Finsch and the old Cullinan plant.
Current Trading
-- Total production of 718,635 carats for July and August; on
track to achieve previously stated guidance of 3.8 - 4.0 Mcts for
FY 2019 (excluding KEM JV).
-- Grades recovered in FY 2019 to date are in line with
expectations, with Cullinan recording a ROM grade of 40.6 cpht in
the financial year to date.
-- Previously reported turnaround at Koffiefontein being
maintained, in line with FY 2019 targeted throughput.
-- Sales of ca. US$78 million from the September tender, with
prices down ca. 5% on a like-for-like basis, compared with H2 FY
2018, affected by seasonal weakness as in previous years. Cullinan
average price in the lower end of historical price ranges. Six
further tenders planned for FY 2019.
-- Current ZAR:USD weakness is expected to have positive impact on ZAR cashflows.
Operational Highlights
-- Safety: Group Lost Time Injury Frequency Rate ('LTIFR') improved to 0.23 (FY 2017: 0.27).
-- Production excluding KEM JV up 19% to 3.8 Mcts (FY 2017: 3.2
Mcts); including KEM JV, up 15% to 4.6 Mcts (FY 2017: 4.0
Mcts).
-- Operational Capex (excluding capitalised borrowing costs) of
US$129.6 million (FY 2017: US$226.2 million), reflecting the
declining trend due to the advanced stage of the Group's expansion
programmes.
-- In Rand terms, the Group achieved absolute on mine costs in
line with expectations, however the strength of the Rand in FY
2018, as well as the effect of accelerated depreciation, has had a
negative impact on US Dollar reported operating costs.
Corporate
-- Net proceeds of ca. US$170 million raised via the Rights
Issue; ca. US$107 million used to fully pay down outstanding drawn
indebtedness with the South African Lending Group post Year end,
whilst retaining both facilities.
-- Binding Heads of Agreement reached post Year end with regards
to the disposal of the Company's interest in the KEM JV to Petra's
joint venture partner Ekapa Mining (Pty) Ltd ("Ekapa Mining").
-- As noted in the FY 2018 Trading Update, the Nomination
Committee is currently in year two of its three year succession
plan and is continuing to review its Board, board committee and
senior management structures. Good progress is being made with
plans to make additional changes in FY 2019 in order to ensure the
Company has the right mix of expertise and skills. New
non-executive appointments are currently being confirmed with a
view to making an announcement in this regard in October 2018.
-- As part of the Nomination Committee Succession plan, a
process to identify a successor for the CEO position has now
commenced. In line with the Company's development from a phase of
intensive capital expenditure and expansion to a focus on steady
state operations, Johan Dippenaar will be stepping down from the
role when an appointment has been made.
-- No covenant measurement required for June 2018, further to
the South African lender group agreeing to waive this covenant
measurement period.
Outlook
-- Focus on operational cost efficiencies; total FY 2019
absolute on-mine cash costs are expected to remain largely flat
compared to FY 2018 costs in ZAR local currency.
-- FY 2019 Capex (excluding capitalised borrowing costs) is
guided at ca. US$93 million, continuing the declining trend since
peak Capex was reached in FY 2016.
-- The recent ZAR:USD weakness has provided favourable hedging
opportunities and the Board is reviewing the potential to take a
longer view and increase percentages of US Dollar denominated sales
covered.
-- Whilst noting the typical seasonal weakness experienced at
the first tender of FY 2019, the Company expects prices to be
broadly stable in FY 2019.
Johan Dippenaar, CEO, said:
"FY 2018 yielded good operational results, the highest on record
to date, in spite of the challenges experienced in FY 2017 and H1
FY 2018, and this was underpinned by strong safety performance
across the Group.
Learning from past challenges, the Group's focus is to regain
investor confidence by the continued optimisation of operations,
thereby delivering consistent production output with efficient
operating and capital expenditure. Petra remains on track to
generate free cash flow, enabling the Company to achieve a
reduction in leverage to its target of two times or less
consolidated net debt to consolidated EBITDA by the end of FY
2020."
Commenting on the Succession Plan announcements, Adonis
Pouroulis, Chairman, said:
"Johan has led Petra through a long period of significant
growth, taking the Company's annual production from approximately
175,000 carats in FY 2006 to 4.6 million carats in FY 2018, and
establishing the Company as a leading independent diamond producer.
As Petra now approaches the final stage of its expansion plans, it
is positioned to reap the benefits and, in line with the Nomination
Committee's Succession Plan, a successor for the CEO position will
be appointed in due course. Johan will continue in the role of CEO
until this time and will work closely with the Board to ensure an
efficient handover. I would like to take this opportunity to
express the Board's sincere gratitude for all that he has done for
Petra.
We look forward to updating the market with new non-executive
appointments in October."
Results Presentation, Webcast and Conference Call
Presentation:
A presentation for analysts will be held at 9:30am BST on 17
September 2018 at the offices of Buchanan, 107 Cheapside, London
EC2V 6DN.
Webcast:
A live webcast of the presentation will be available on Petra's
website at www.petradiamonds.com and on:
https://www.investis-live.com/petra-diamonds/5b88fe18a2d81c0a0082b43c/pdpr.
A recording will be available from 1:00pm BST on 17 September
2018 on the same link.
A conference call line will also be available to allow
participants to listen to the webcast by dialling one of the
following numbers shortly before 9:30am BST:
From the UK (toll free): 0808 237 0040
From South Africa (toll free): 0800 222 290
From the rest of the world: +44 20 3428 1542
Participant passcode: 72931911#
Conference Call
A conference call with management to cater for North American
and other international investors will be held at 4:00pm BST on 17
September 2018. Participants are advised to view the results
presentation webcast in advance of the call, as the full management
commentary on the results will not be repeated.
From the United States (toll free): 1866 928 7517
From the rest of the world: +44 203 428 1542
From the UK (toll free): 0808 237 0040
Participant passcode: 72472759#
SUMMARY OF RESULTS (unaudited)
Restated(8)
Year ended
Year ended 30 June
30 June 2018 2017
("FY 2018") ("FY 2017")
US$ million US$ million
------------------------------------------ ---- -------------- -------------
Revenue 495.3 394.8
Adjusted mining and processing
costs(1) (291.4) (242.6)
Other direct income 1.2 1.7
-------------- -------------
Profit from mining activity(2) 205.1 153.9
-------------- -------------
Exploration expense (0.6) (0.6)
Corporate overhead (9.1) (10.7)
-------------- -------------
Adjusted EBITDA(3) 195.4 142.6
-------------- -------------
Depreciation (128.0) (63.3)
Share-based expense (0.6) 0.1
Net finance expense (excluding
net unrealised foreign exchange
gain and bond redemption premium
and accretion of unamortised
costs) (59.6) (22.7)
Tax expense (excluding taxation
charge on reduction of unutilised
Capex benefits) (5.6) (26.9)
-------------- -------------
Adjusted net profit after tax(4) 1.6 29.8
-------------- -------------
Impairment charge(5) (66.0) -
Net unrealised foreign exchange
(loss) / gain (26.2) 8.6
Taxation charge on reduction (8.2) -
of unutilised Capex benefits
Bond redemption premium and acceleration
of unamortised costs(7) - (22.3)
-------------- -------------
(Loss) / profit from continuing
operations (98.8) 16.1
(Loss) / profit on discontinued
operations, net of tax(8) (104.3) 4.6
-------------- -------------
Net (loss) / profit after tax (203.1) 20.7
-------------- -------------
Earnings per share attributable
to equity holders of the Company
- US$ cents
Basic (loss) / profit - from
continuing and discontinued operations (31.29) 3.14
Basic (loss) / profit per share
- from continuing operations (15.85) 3.14
Adjusted profit per share - from
continuing operations(6) 0.50 5.50
Unit As at 30 As at 30
June
June 2017
2018 (US$ million)
(US$ million)
Cash at bank - (including
restricted amounts) US$m 236.0 203.7
Diamond debtors US$m 75.0 32.6
Diamond inventories US$m 54.0 42.3
Diamond inventories Carats 529,054 493,296
US$650 million loan
notes (issued April
2017)(9) US$m 650.0 650.0
Bank loans and borrowings(10) US$m 106.7 109.0
Net debt(11) US$m 520.7 555.3
Bank facilities undrawn
and available US$m 2.6 5.6
Consolidated net debt
for covenant measurement
purposes(12) US$m 531.6 618.5*
Consolidated net debt
to consolidated EBITDA
ratio X 2.7 3.9*
------------------------------- -------------- --------------- ---------------
*Including KEM JV
The following exchange rates have been used for this
announcement: average for the Year US$1:ZAR12.86 (30 June 2017:
US$1: ZAR13.59); closing rate as at 30 June 2018 US$1:ZAR13.73 (30
June 2017 US$1:ZAR13.05).
Notes:
The Group uses several non-GAAP measures above and throughout
this report to focus on actual trading activity by removing certain
non-cash or non-recurring items and discontinued operations. These
measures include adjusted mining and processing costs, profit from
mining activities, adjusted EBITDA, adjusted net profit after tax,
adjusted earnings per share, adjusted US$ loan note and net debt.
As these are non-GAAP measures, they should not be considered as
replacements for IFRS measures. The Group's definition of these
non-GAAP measures may not be comparable to other similarly titled
measures reported by other companies. The Board believes that such
alternative measures are useful as they exclude one-off items such
as the impairment of mines and non-cash items to help portray a
clearer understanding of the underlying trading performance of the
Group.
1. Adjusted mining and processing costs are mining and
processing costs stated before depreciation and share-based
expense.
2. Profit from mining activities is revenue less adjusted mining
and processing costs plus other direct income.
3. Adjusted EBITDA is stated before depreciation, share-based
expense, net finance expense (excluding net unrealised foreign
exchange gain), tax expense (excluding taxation charge on
unutilised Capex benefits), loss / profit on discontinued
operation, impairment charge, net unrealised foreign exchange gains
and losses, taxation charge on reduction of unutilised Capex
benefits and bond redemption premium and acceleration of
unamortised cost.
4. Adjusted net profit after tax is net profit after tax stated
before loss / profit on discontinued operation, impairment charge,
net unrealised foreign exchange gains and losses, taxation charge
on reduction of unutilised Capex benefits and bond redemption and
acceleration of unamortised costs.
5. Impairment charge of US$66.0 million is due to the Group's
impairment review of the Koffiefontein operation. Refer to note 16
for further details.
6. Adjusted EPS from continuing operations is stated before the,
impairment charge, net unrealised foreign exchange gains and
losses, taxation charge on reduction of unutilised Capex benefits
and bond redemption premium and acceleration of unamortised
costs.
7. Bond redemption premium and acceleration of unamortised costs
represent those costs incurred as a result of the early redemption
of the US$300 million loan notes in April 2017.
8. The (loss) / profit on discontinued operation reflect the
results of the KEM JV (net of tax), including impairment (FY 2017
results have been amended for comparability) as per the
requirements of IFRS 5, refer to Note 17.
9. The US$ loan note represents the gross capital of US$650
million (30 June 2017: US$650 million), excluding transaction
costs.
10. Subsequent to Year end, the Company repaid the RCF (capital
plus interest) of US$73.1 million and WCF (capital plus interest)
of US$33.6 million in full, however the facilities were not
cancelled.
11. Net debt is the US$ loan notes and bank loans and borrowings
net of cash at bank (including restricted cash).
12. Consolidated Net Debt is bank loans and borrowings plus loan
notes, less cash, less diamond debtors and includes the BEE
guarantees of ca. US$85.9 million (ZAR1,179 million) (FY2017:
US$104.7 million (ZAR1,366)) issued by Petra to the lenders as part
of the BEE financing concluded in December 2014.
13. Adjusted operating cashflow is cash generated from
operations adjusted for the cash effect of the movement in diamond
debtors.
The information communicated in this announcement is inside
information for the purposes of Article 7 of Regulation
596/2014.
For further information, please contact:
Petra Diamonds, London Telephone: +44 20 7494 8203
Cornelia Grant
Marianna Bowes investorrelations@petradiamonds.com
Buchanan Telephone: +44 20 7466 5000
(PR Adviser)
Bobby Morse pdl@buchanan.uk.com
About Petra Diamonds Limited
Petra Diamonds is a leading independent diamond mining group and
a consistent supplier of gem quality rough diamonds to the
international market. The Company has a diversified portfolio
incorporating interests in three underground producing mines in
South Africa (Finsch, Cullinan and Koffiefontein) and one open pit
producing mine in Tanzania (Williamson). It announced in July 2018
the proposed disposal of its interest in the Kimberley Ekapa Mining
JV in South Africa. It also maintains an exploration programme in
Botswana and South Africa.
Petra's strategy is to focus on value rather than volume
production by optimising recoveries from its high quality asset
base in order to maximise their efficiency and profitability. The
Group has a significant resource base of ca. 290 million carats,
which supports the potential for long-life operations.
Petra conducts all operations according to the highest ethical
standards and will only operate in countries which are members of
the Kimberley Process. The Company aims to generate tangible value
for each of its stakeholders, thereby contributing to the
socio-economic development of its host countries and supporting
long-term sustainable operations to the benefit of its employees,
partners and communities. Petra is quoted with a premium listing on
the Main Market of the London Stock Exchange under the ticker 'PDL'
and is a constituent of the FTSE4Good Index. For more information,
visit www.petradiamonds.com.
CEO'S REVIEW
The number one priority of any business like ours is safety and
this sits at the heart of everything we do. We are therefore
greatly encouraged by the strong performance in this area over the
Year, with the Group reporting an LTIFR of 0.23 (FY 2017: 0.27).
Whilst this is a noteworthy achievement, reaching a zero-harm
workplace remains our key priority and we strive towards this
goal.
Based on production recorded in the first two months of FY 2019,
the Group is on track to achieve its FY 2019 target of 3.8 - 4.0
Mcts (excluding KEM JV). Grades recovered to date are also in line
with expectations, with Cullinan recording a ROM grade of 40.6 cpht
in the first two months of the year.
Taking into account the operational delays we experienced in FY
2017, including bringing the new plant at Cullinan on stream and a
slower than anticipated ramp up of the new Sub Level Cave ("SLC")
at Finsch, coupled with the business challenges in H1 FY 2018,
relating to strikes in South Africa (resolved after two weeks) and
the parcel of ca. 72,000 carats from Williamson in Tanzania that
remains blocked from export, we achieved solid operational results
for the Year which is testament to the continued hard work of our
team.
Excluding KEM JV, group production saw an increase of 19% to 3.8
Mcts and revenue grew by 25% to US$495.3 million. As a result of
the increased revenue achieved, we recorded a 33% increase in
profit from mining activities of US$205.1 million (FY 2017:
US$153.9 million), which, coupled with a continued tight control on
overheads, resulted in a healthy adjusted EBITDA margin of 39% (FY
2017: 36%). Optimisation of the new plant at Cullinan is ongoing
and the recovered ROM grade achieved in Q4 FY 2018 demonstrated the
progress being made, and was in line with guidance at 39 cpht.
Reflecting the advanced stages of the Group's expansion
programmes, the growth in diamond production for the Year was
driven by an increase in higher value carats from ROM operations,
with the contribution from lower value diamonds from surface
tailings operations decreasing as planned. ROM carats represented
95% of the overall production profile in FY 2018, increasing from
86% in the prior year.
In Rand terms, the Group achieved absolute on mine costs in line
with expectations (excluding KEM JV, where expenditure relating to
security and other measures associated with illegal mining
activities inflated costs), however the strength of the Rand, as
well as the effect of accelerated depreciation, has had a negative
impact on US Dollar reported operating costs. Driving cost
efficiencies across our asset portfolio will be a focus for the
Company going forward.
Operational Capex (excluding capitalised interest) decreased 46%
as a result of our reducing capital profile, and in line with
budget, and we expect this trend to continue with ca. US$93 million
of Capex in FY 2019 (excluding KEM JV and capitalised borrowing
costs) and ca. US$72 million in FY 2020[1].
Taking into account the lower levels of capital expenditure
going forward, Petra's future focus will be on the continued
optimisation of operations and the generation of free cash flow. A
key part of the Company's strategy going forward will be to drive
operational efficiencies throughout the portfolio, with an emphasis
on value-over-volume production.
Petra completed a Rights Issue in June 2018 to raise net
proceeds of ca. US$170 million, in which all directors who are
shareholders took up their full allocation of rights amounting to
ca. 14.4 million shares. The Rights Issue enabled a reduction in
leverage to 2.7x Consolidated Net Debt to Consolidated EBITDA at 30
June 2018 (30 June 2017 2017: 3.9x). The Board has set a target to
further reduce this ratio to a more sustainable level of 2x or less
by the end of FY 2020.
Another important element of the Company's strategy is the
ongoing review of its assets to maximise return on capital. In H1
FY 2018, Koffiefontein and KEM JV were subject to impairments
totalling a combined US$118.0 million, due to the fact that each of
the operations has a high level of sensitivity to the strengthening
of the Rand on the US Dollar operating costs, coupled with
execution risk related to their remaining expansion targets, as
well as lower than forecast pricing for KEM JV, as a result of a
higher than anticipated proportion of smaller, low value goods, and
revised lower pricing at Koffiefontein. In response to the
unsatisfactory performance at these operations, a number of
management interventions were implemented, including the relocation
of key personnel to local management positions, as well as
restructuring capital and operational costs.
We are pleased to note that Koffiefontein saw improvements
towards the end of the Year, as a result of the commissioning of
the new ground handling system in Q3 FY 2018; this improved
operational delivery was also evident in the first two months of FY
2019. We believe that we have now put the right conditions in place
for this mine to start making a positive contribution to the Group
in the current financial year.
Shortly after Year end, we announced the proposed disposal of
KEM JV, demonstrating the effective rationalisation of the Group's
portfolio. The operation will be transferred to the sole ownership
of Ekapa Mining, thereby ensuring its sustainable future, under the
stewardship of an operator best suited to maximise its value.
We continue to review our Board, Board committees and senior
management structures in line with the Company's development from a
phase of intensive capital expenditure and expansion to a focus on
steady state operations. As part of this process, Jacques
Breytenbach was appointed as Finance Director during the Year. As
previously announced, Jim Davidson retired from his position as
Petra's Technical Director at the end of FY 2018. As per the
Nomination Committee Succession plan, I will be stepping down from
the Company but will be working closely with the Board to ensure a
smooth transition and handover.
Turning to labour relations, whilst we saw a short period of
disruption at the Company's South African mines (except for
Cullinan) in September 2017, the new three year wage agreement
agreed at the end of that month provided for a more stable
environment going forward and the Group continues to enjoy good
relations.
Petra makes a valuable economic contribution to the countries in
which we operate and a vital part of this is to maintain supportive
relationships and open communication with our host governments and
regulators. Petra is in ongoing dialogue with the Government of
Tanzania and local advisers in relation to recent legislative
developments. In South Africa, a revised draft Mining Charter was
published for public comments in June 2018 and the Company
subsequently worked with the Minerals Council South Africa to
provide submissions. We welcome ongoing engagement in relation to
the finalisation of the Mining Charter in due course.
DIVID
Distribution covenants were not met for the measurement period
to 30 June 2018. Petra will not declare a dividend for FY 2018.
Returns to shareholders remain a priority for the Board and as
the Company becomes increasingly cash generative, it intends to
resume dividend payments. The decision as to whether to pay a
dividend is reviewed by the Board regularly and the market will be
updated on this when appropriate.
THE DIAMOND MARKET
The diamond market was stable throughout FY 2018, though subject
to normal seasonal fluctuations in pricing, with Petra's prices on
a like-for-like basis were up ca. 2% for the Year, compared to FY
2017. The market saw seasonal weakness in July to October 2017,
with Petra prices on a like-for-like basis down approximately 5%
before recovering approximately 1.5% in December 2017, and since
increasing by approximately 5% in H2 FY 2018. Such fluctuations in
part reflect the seasonal nature of the rough market, due to the
fact that retailers are ready to restock after the festive selling
season, which includes Thanksgiving in the U.S., Christmas, Chinese
New Year and Valentine's Day, thereby serving to introduce fresh
liquidity into the diamond pipeline and draw down inventory levels
of polished diamonds.
The start of FY 2019 saw typical seasonal weakness during
Petra's first tender of the year with prices down ca. 5% on a
like-for-like basis, compared with H2 FY 2018, mainly due to softer
prices in smaller size ranges. The Company expects the diamond
market to be broadly stable during FY 2019. The Company will hold
two more tenders during H1 FY 2019 and four tenders in H2 FY 2019,
as usual.
An important factor in the long-term sustainability of our
market is the Diamond Producers Association ("DPA"), of which Petra
is a founder member and which aims to support consumer demand for
diamonds. The DPA committed a significantly increased investment of
US$70 million to generic marketing for 2018 to enabling the
expansion of its efforts in the major US market, where it is
focussing on female self-purchasing, as well as in India (where it
launched in November 2017) and China (initiating in the summer of
2018). The DPA's media campaigns have shown a strong performance in
terms of influencing consumer sentiment and a study published on
the efficacy of the "Real is Rare" campaign noted the successful
achievement of its objective to drive perceptions and affinity
towards diamonds.
Global jewellery demand grew 2% in 2017 to reach US$82 billion,
with the US once again showing the fastest growth in terms of
consumer demand (+42% to US$43 billion), according to the De Beers
Diamond Insight Report 2018.
On the supply side, global diamond output increased by 19% in
2017 to 150.9 Mcts (2016: 126.4 Mcts), however this still remains
below the high of 177 Mcts in 2005, which is believed by many to
represent world 'peak diamond' supply. The rise in production was
driven by new mines coming into production (Renard and Gahcho Kue
in Canada and Liqhobong in Lesotho), as well as increases from
Russia, Botswana, South Africa, the DRC and Australia.
The world's largest diamond mines are maturing and past their
peak production levels, particularly as some open pit producers
have to transition to be underground operations. Furthermore, the
success rate in diamond exploration is estimated to be less than 1%
and there have been no significant finds this century and
exploration expenditure has been cut worldwide. Therefore, despite
the three new mines coming on stream in late 2016, they are not
large enough to impact the overall constrained supply picture.
Petra sales and prices:
Petra experienced strong attendance at all of its sales
throughout the Year, with steady demand generally across all
assortments (sizes, colours and qualities). Carats sold by Petra
increased 19% to ca. 3.8 Mcts, but revenue increased by 25% to
US$495.3 million, due to the slightly better like-for-like pricing
for the Year, as well as an improving average product mix due to
the higher proportion of ROM versus tailings carats in comparison
to FY 2017.
As announced in the FY 2018 Trading Update, following an
assessment of the level of guidance provided by the Company, future
price guidance has been removed. Petra will continue to report
actual prices achieved accompanied by additional commentary as
required to highlight any anomalies.
Mine Actual(3) Actual(3)
US$/ct US$/ct
FY 2018 FY 2017
Finsch 108(1) 101
--------- ---------
Cullinan 125(2) 120
--------- ---------
Koffiefontein 525(1) 506
--------- ---------
Williamson 270(3) 258
--------- ---------
Notes:
1. In line with expectations
2. Below historical annual averages (see below) due to lower incidence of higher value stones
3. Higher average value achieved due to higher incidence of high value stones
Due to the variability in Cullinan's achieved prices, the
following historical price information is provided, which is based
on the sale of 7,883,301 carats over the nine year period FY 2010
to FY 2018 for an average of US$144 per carat:
-- on an annual basis, a high of US$185 per carat and a low of
US$120 per carat was achieved (FY 2018: US$125 per carat);
-- on a half yearly basis, a high of US$247 per carat and a low
of US$87 per carat was achieved (FY 2018: high of US$140 and low of
US$118); and
-- on a quarterly basis, a high of US$293 per carat and a low of
US$63 per carat was achieved (FY 2018: high of US$157 and low of
US$97).
FINANCIAL REVIEW
Revenue
Revenue increased 25% to US$495.3 million (FY 2017: US$394.8
million), due to the number of carats sold for the Year increasing
19% to 3,793,799 carats (FY 2017: 3,184,893 carats) and an
improving average product mix due to the higher proportion of ROM
versus tailings carats.
Diamond inventory as at 30 June 2018 was 529,054 carats /
US$54.0 million (FY 2017: 493,296 carats / US$42.3 million).
Mining and processing costs
The mining and processing costs for the Year are comprised of
on-mine cash costs as well as other operational expenses. A
breakdown of the total mining and processing costs for the Year is
set out below.
Group
Diamond technical, Total
inventory support Adjusted mining and
On-mine and and mining and Share processing
cash Diamond stockpile marketing processing based costs
costs(1) royalties movement costs(2) costs Depreciation(3) expense (IFRS)
US$m US$m US$m US$m US$m US$m US$m US$m
FY 2018 261.4 14.2 (9.5) 25.3 291.4 127.2 - 418.6
----------- ----------- ----------- ----------- ----------- ---------------- ----------- -----------
FY 2017 218.4 4.6 (1.7) 21.3 242.6 62.3 0.1 305.1
----------- ----------- ----------- ----------- ----------- ---------------- ----------- -----------
Notes:
1. Includes all direct cash operating expenditure at operational
level, i.e. labour, contractors, consumables, utilities and on-mine
overheads.
2. Certain technical, support and marketing activities are conducted on a centralised basis.
3. Excludes exploration and corporate / administration.
Absolute on-mine cash costs in FY 2018 remained in line with
expectations, despite ongoing inflationary pressures. On-mine cash
costs increased by 20% compared to FY 2017, mainly due to:
-- increase in production / volumes treated (8% increase);
-- inflationary increases, including the impact of electricity
and labour costs (7% increase); and
-- the effect of translating ZAR denominated costs at the South
African operations at a stronger ZAR/USD exchange rate (5%
increase).
Profit from mining activities
Profit from mining activities increased 33% to US$205.1 million
(FY 2017: US$153.9 million), due to the increase in revenue and
other direct income, partially offset by a 20% increase in
costs.
Corporate overhead - General and Administration
Corporate overhead (before depreciation and share based
payments) decreased to US$9.1 million for the Year (FY 2017:
US$10.7 million).
Adjusted EBITDA
Adjusted EBITDA, being profit from mining activities less
exploration and corporate overhead, increased by 37% to US$195.4
million (FY 2017: US$142.6 million), representing an adjusted
EBITDA margin of 39% (FY 2017: 36%) driven by an improved product
mix.
Depreciation
Depreciation for the Year increased to US$128.0 million (FY
2017: US$63.3 million), mainly due to:
-- the commencement of depreciation relating to newly
commissioned assets associated with the expansion programmes;
-- accelerated depreciation of US$25.2 million associated with
the old Cullinan plant and older mining areas at Finsch and
Cullinan no longer in the mining plan (most notably Finsch's South
West Precursor above 63L), as noted in the Company's trading update
and guidance in July 2018; and
-- the strengthening of the Rand during the Year.
Historical depreciation (FY 2009 to FY 2018) amounted to ca.
US$473 million. Depreciation for FY 2019 expected to be ca. US$90
million.
Impairment charge
As a result of the impairment review carried out at
Koffiefontein during the Year, the Board recognised an overall
impairment charge of US$66.0 million (FY 2017: US$nil million).
Further details are provided in Note 16.
Loss on discontinued operations - KEM JV
The loss on discontinued operations of US$104.3 million relates
to the reclassification of KEM JV as a discontinued operation
following a decision by the Board to sell the KEM JV at 30 June
2018 and subsequent binding offer from its joint venture partner
Ekapa Mining, to purchase the operation from the Company and its
BEE partners, and consists of:
-- an impairment charge attributable to property, plant and
equipment and trade receivables of US$92.7 million comprising:
o US$52.0 million impairment charge recognised during H1 FY
2018;
o US$40.7 million impairment charge recognised during H2 FY
2018;
-- US$4.2m impairment of property, plant and equipment in
relation to the Bultfontein assets damaged as a result of the mud
rush in May 2018;
-- US$36.5 million (net of anticipated proceeds receivable from
the offer to purchase of US$18.6 million) impairment in respect of
property, plant and equipment and certain receivables.
-- a US$11.6 million charge attributable to KEM JV's net loss
for the period 1 July 2017 to 30 June 2018. For comparative
purposes, the prior period results for KEM JV have been restated,
which show a profit after tax of US$4.6 million. Refer to note 17
for the detailed breakdown.
Net financial expense
Net financial expense of US$85.8 million (FY 2017: US$36.4
million) comprises:
-- interest received on bank deposits of US$3.5 million (FY 2017: US$1.7 million); and
-- net realised foreign exchange gains on settlement of forward
exchange contracts of US$0.9 million (FY 2017: US$nil million);
offset by:
-- interest on the Group's debt and working capital facilities
of US$47.5 million (FY 2017: US$3.9 million) (stated after the
capitalisation of interest of US$15.2 million (FY 2017: US$44.1
million) associated with the funding of assets under development);
the year on year increase is as a result of expansion programmes
transitioning to production phases;
-- net interest payable on the BEE partners' loans of US$12.4
million (FY 2017: US$12.8 million);
-- net realised foreign exchange losses of US$nil million (FY
2017: US$3.9 million) on the settlement of forward exchange
contracts;
-- net unrealised foreign exchange losses of US$26.2 million (FY
2017: US$8.6 million gain) representing (i) the unrealised foreign
exchange gains on the foreign currency retranslation of cross
border loans considered to be repayable in the foreseeable future,
(ii) unrealised losses on forward exchange contracts and (iii)
unrealised foreign exchange losses on Rights Issue proceeds (refer
to note 6 for further detail);
-- a charge for the unwinding of the present value adjustment
for Group rehabilitation costs of US$4.1 million (FY 2017: US$3.8
million); and
-- non-recurring costs of US$nil million (FY 2017: US$22.3
million associated with the refinancing and early redemption of the
US$300 million loan notes, comprising acceleration of unamortised
costs (US$7.3 million previously capitalised) and early redemption
premium of US$15.0 million to settle the US$300 million loan
notes).
Tax charge
The tax charge of US$13.8 million (FY 2017: US$26.9 million),
comprised deferred tax of US$3.3 million (FY 2017: US$24.6
million), and an income tax charge of US$10.5 million (FY 2017:
US$1.2 million credit), including the one-off settlement with the
South African Revenue Service ("SARS") on the right to claim a
deduction on unutilised capital allowances (US$8.2 million),
resulted in an increase of US$5.2 million in the Group's deferred
tax liabilities and an additional US$3.1 million in current
taxation payable.
The current period effective tax rate is higher than the South
Africa tax rate of 28% (the Group's primary tax paying
jurisdiction) predominantly due to:
-- the one-off settlement to SARS as detailed above;
-- permanent difference as a result of the Koffiefontein impairment charge;
-- loss making companies where deferred tax assets are not recognised; and
-- loss making companies within the Group based in tax
jurisdictions with a 0% tax rate (which, when consolidated, reduces
the Group's overall net profit resulting in an increased effective
tax rate).
The tax charge for FY 2018 arises due to deferred tax (net of
charges and credits), reflecting principally the utilisation of
certain capital allowances, predominantly at Cullinan and Finsch
during the Year, and South African current taxation payable at
Finsch.
Group loss / profit
The Group's net loss after tax is US$203.1 million (FY 2017 net
profit: US$20.7 million).
Earnings per share
Adjusted basic earnings per share from continuing operations
(adjusted for the Koffiefontein impairment charge, net unrealised
foreign exchange gains and losses, taxation charge on reduction of
unutilised Capex benefits, bond redemption premium and acceleration
of unamortised costs and loss on discontinued operations) of 0.50
US$ cents was recorded (FY 2017: 5.50 US$ cents).
Basic loss per share from continuing operations of 15.85 US$
cents was recorded (FY 2017 basic earnings per share: 3.14 US$
cents).
Adjusted operating cashflow
Adjusted operating cashflow for the Year increased 7% to
US$157.0 million (FY 2017: US$ 147.0 million), in line with the
increase in Adjusted EBITDA and the outflow from net working
capital changes (excluding the cash effect of the movement of
diamond debtors) of US$39.0 million (FY 2017: US$19.0 million
outflow), impacted by issues in Tanzania (as noted above).
Cash and Diamond Debtors
As at 30 June 2018, Petra had cash at bank of US$236.0 million
(30 June 2017: US$203.7 million). Of these cash balances, US$221.6
million was held as unrestricted cash (30 June 2017: US$190.2
million), US$13.6 million was held by Petra's reinsurers as
security deposits on the Group's cell captive insurance structure
(with regards to the Group's environmental guarantees) (30 June
2017: US$12.6 million) and US$0.8 million was held by Petra's
bankers as security for other environmental rehabilitation bonds
lodged with the Department of Mineral Resources in South Africa (30
June 2017: US$0.9 million).
Diamond debtors at 30 June 2018 were US$75.0 million (30 June
2017: US$32.6 million). These related to the June 2018 tenders
which closed at the very end of the financial Year and were settled
shortly after Year end.
Loans and Borrowings
The Group had loans and borrowings (measured under IFRS) at Year
end of US$754.8 million (30 June 2017: US$757.1 million), comprised
of the loan notes plus accrued interest of US$648.1 million (30
June 2017: US$648.1 million) and bank loans and borrowings of
US$106.7 million (30 June 2017: US$109.0 million). At 30 June 2018,
the Group had debt facilities undrawn and available to the Group of
US$2.6 million (30 June 2017: US$5.6 million), in addition to cash
at bank of US$236.0 million. In accordance with one of the core
objectives of the Rights Issue, the Company fully paid down
outstanding drawn indebtedness with its South African Lending Group
post Year end, following receipt of the Rights Issue proceeds,
however the facilities remain available.
Covenant Measurements attached to banking facilities
The Group has a number of covenants related to its banking
facilities, which can be found on Petra's website at:
www.petradiamonds.com/investors/fixed-income-investors/banking-covenants/.
Covenant ratios are measured bi-annually on a rolling 12 month
period to 30 June and 31 December respectively, with the formal
measurement taking place three months after the period end. In the
Company's Rights Issue launch announcement on 24 May 2018, it
announced that no covenant measurement will be taken for June 2018,
further to the South African lender group agreeing to waive this
covenant measurement period following the completion of the Rights
Issue. The Company has since been engaging with the South African
lender group in order to simplify the financing agreements with
regards to covenants and BEE partner debt.
The Group closely monitors and manages its liquidity risk, and
cash forecasts are regularly produced and run for different
scenarios, indicating that the Group has sufficient cash reserves,
without the need to utilise available banking facilities, to meet
its working capital and capital development requirements under its
forecasts including sensitivities.
The Company expects to be compliant with its financial covenants
going forward, but the situation remains sensitive to changes in
diamond prices, exchange rates and expected production from the
Group's mines, including total carats and mix.
BEE loans receivable and payable
BEE loans receivable of US$64.7 million (FY 2017: US$35.0
million) relate to the acquisition and financing of the
Koffiefontein and KEM JV mines by Petra on behalf of its BEE
partners, advances provided to the BEE partners to enable the BEE
partners to discharge interest and capital commitments under the
BEE Lender facilities and other advances to the BEE partners which
have enabled IPDET to make distributions to their beneficiaries.
During the Year, the Group advanced US$31.0 million (FY 2017:
US$9.2 million) to facilitate the servicing of loan repayments
(capital plus interest) by the BEE partners and distributions by
the BEE partners to the beneficiaries.
The BEE loans payable of US$110.5 million (FY 2017: US$99.5
million) relate to the initial acquisition loan funding advanced by
the Group's BEE partners to the operations to acquire their
investments in Finsch and Cullinan. The repayment of these loans by
the mines to the BEE partners will be from future free cashflows
generated by the mining operations.
Refer to note 12 for further detail on BEE loans receivable and
payable.
Other Liabilities
Other than trade and other payables of US$130.8 million
(comprising US$34.9 million trade creditors, US$15.5 million
employee related accruals and US$80.4 million other payables) (FY
2017: US$136.7 million), the remaining liabilities on the balance
sheet mainly comprise provisions for rehabilitation liabilities,
post retirement employee related provisions and deferred tax.
Capex
Total Group Capex for the Year was US$145.5 million (FY 2017:
US$271.7 million), further to peak Capex being reached in FY 2016,
comprising:
-- US$110.7 million expansion Capex (FY 2017: US$206.4 million);
-- US$18.9 million sustaining Capex (FY 2016: US$19.8 million);
-- US$15.2 million capitalised borrowing costs with regards to
the expansion Capex (FY 2017: US$44.1 million); and
-- Corporate / exploration Capex of US$0.7 million (FY 2017: US$1.4 million).
Capex Unit FY 2018 FY 2017
Finsch US$M 54.0 85.6
------ -------- --------
Cullinan US$M 73.9 151.2
------ -------- --------
Koffiefontein US$M 12.3 18.8
------ -------- --------
Williamson US$M 4.6 15.0
------ -------- --------
Subtotal - Capex incurred by
operations US$M 144.8 270.6
------ -------- --------
Petra internal projects division
- Capex under construction
/ invoiced to operations(1) US$M - (0.3)
------ -------- --------
Total Operational Capex US$M 144.8 270.3
------ -------- --------
Corporate / exploration US$M 0.7 1.4
------ -------- --------
Total Group Capex(2) US$M 145.5 271.7
------ -------- --------
Notes:
1. The Group (Petra internal projects division and Other
Corporate) incurs capital spend on behalf of the operations and
although this spend is reported in the Group's total Capex, it is
policy not to account for it on a specific mine's Capex until the
work completed is invoiced to the relevant operation.
2. Capex for the Year includes US$15.2 million (FY 2017: US$44.1
million) capitalised borrowing costs, which is also included in the
applicable mine-by-mine tables below.
3. Petra's annual Capex guidance is cash-based and excludes
capitalised borrowing costs. Given that the majority of Petra's
expansion and development programmes are primarily complete,
Petra's guidance is to assume that the majority of interest and
financing fees will be expensed through the income statement from
FY 2019.
OPERATIONAL REVIEW
Combined operations (Excluding KEM JV)
Unit FY 2018 FY 2017 Variance
Sales
-------- ---------- ---------- ---------
Diamonds sold Carats 3,793,799 3,184,893 +19%
-------- ---------- ---------- ---------
Revenue US$M 495.3 394.8 +25%
-------- ---------- ---------- ---------
Production
-------- ---------- ---------- ---------
ROM tonnes Mt 12.1 9.4 +29%
-------- ---------- ---------- ---------
Tailings & other tonnes Mt 1.6 2.6 -39%
-------- ---------- ---------- ---------
Total tonnes treated Mt 13.7 12.0 +14%
-------- ---------- ---------- ---------
ROM diamonds Carats 3,649,704 2,761,464 +32%
-------- ---------- ---------- ---------
Tailings & other(2)
diamonds Carats 186,132 451,315 -59%
-------- ---------- ---------- ---------
Total diamonds Carats 3,835,836 3,212,779 +19%
-------- ---------- ---------- ---------
On mine cash costs US$M 261.4 218.4 +20%
-------- ---------- ---------- ---------
Capex
-------- ---------- ---------- ---------
Expansion US$M 110.7 206.4 -47%
-------- ---------- ---------- ---------
Sustaining US$M 18.9 19.8 -5%
-------- ---------- ---------- ---------
Borrowing Costs Capitalised US$M 15.2 44.1 -65%
-------- ---------- ---------- ---------
Total operational capex US$M 144.8 270.3 -47%
-------- ---------- ---------- ---------
FY 2018 diamond production excluding KEM JV increased 19% to 3.8
Mcts (FY 2017: 3.2 Mcts). Including KEM JV, production increased
15% to 4.6 Mcts, (FY 2017: 4.0 Mcts) in line with revised guidance,
of 4.6 - 4.7 Mcts, and representing record levels for the Group.
The increase was due the underground expansion programmes
continuing to ramp up and the resultant higher contribution of
undiluted ore from the new mining areas, together with the ongoing
ramp-up of the new Cullinan plant.
The commentary below mainly relates to operational results for
the Year and a brief overview of the outlook. Further detailed
operational guidance, as published on 23 July 2018, is available on
the Company's website at:
https://www.petradiamonds.com/investors/analysts/analyst-guidance/.
Guidance for FY 2019 remains as published, including cost
guidance.
Finsch - South Africa
Unit FY 2018 FY 2017 Variance
Sales
-------- ---------- ---------- -----------
Revenue US$M 231.9 216.7 +7%
-------- ---------- ---------- -----------
Diamonds sold Carats 2,152,786 2,141,885 +1%
-------- ---------- ---------- -----------
Average price per carat US$ 108 101 +7%
-------- ---------- ---------- -----------
ROM Production
-------- ---------- ---------- -----------
Tonnes treated Tonnes 3,084,395 3,212,169 -4%
-------- ---------- ---------- -----------
Diamonds produced Carats 1,926,467 1,818,454 +6%
-------- ---------- ---------- -----------
Grade(1) Cpht 62.5 56.6 +10%
-------- ---------- ---------- -----------
Tailings Production
-------- ---------- ---------- -----------
Tonnes treated Tonnes 794,973 1,651,089 -52%
-------- ---------- ---------- -----------
Diamonds produced Carats 147,010 331,442 -56%
-------- ---------- ---------- -----------
Grade(1) Cpht 18.5 20.1 -8%
-------- ---------- ---------- -----------
Total Production
-------- ---------- ---------- -----------
Tonnes treated Tonnes 3,879,368 4,863,258 -20%
-------- ---------- ---------- -----------
Diamonds produced Carats 2,073,477 2,149,896 -4%
-------- ---------- ---------- -----------
Costs
-------- ---------- ---------- -----------
On-mine cash cost per
tonne treated ZAR 329 253 +30%
-------- ---------- ---------- -----------
Capex
-------- ---------- ---------- -----------
Expansion Capex US$M 42.3 58.4 -28%
-------- ---------- ---------- -----------
Sustaining Capex US$M 7.7 9.1 -15%
-------- ---------- ---------- -----------
Borrowing Costs Capitalised US$M 4.0 18.1 -78%
-------- ---------- ---------- -----------
Total Capex US$M 54.0 85.6 -37%
-------- ---------- ---------- -----------
Note:
1. The Company is not able to precisely measure the ROM /
tailings grade split because ore from both sources is processed
through the same plant; the Company therefore back-calculates the
grade with reference to resource grades.
ROM production increased 6% to 1,926,467 carats (FY 2017:
1,818,454 carats) driven by a higher average ROM grade of 62.5 cpht
(FY 2017: 56.6 cpht), positively impacted by the treatment of
higher-grade surface ROM material, coupled with the increase in
undiluted tonnes from the new Block 5 SLC.
This partially offset the underperformance of ROM tonnage
throughput due to lower tonnes from the South West Precursor
ancillary orebody ("SW Precursor"), where production was curtailed
further to intermittent caving leading to safety concerns around
the stability of the ground conditions in the vicinity of the
mining area. This has necessitated continual reassessment of the
manner in which the SW Precursor orebody can be accessed, as
described further below.
Overall production decreased 4% to 2,073,477 carats (FY 2017:
2,149,896 carats), with the increase in ROM production being offset
by the planned reduction in tailings production, which decreased to
147,010 carats (FY 2017: 331,442 carats). Block 5 SLC ramped up
further and delivered ca. 1.65 Mt in FY 2018 compared to 0.75 Mt in
FY 2017.
Revenue increased by 7% to US$231.9 million (FY 2017: US$216.7
million) mainly due to the greater weighting of higher value ROM
carats (as opposed to lower value tailings carats) in the overall
production profile and the resultant 7% improvement in the average
value per carat to US$108 (FY 2017: US$101).
Costs:
The on-mine cash unit cost of ZAR329/t, an increase of 30% from
FY 2017 (ZAR 253/t), but lower than guidance mainly due to the
planned reduction of treatment of lower cost tailings tonnes and an
increase in drilling and blasting activities associated with SLC
mining.
As the mine transitions from a capital-intensive expansion phase
into a steady state production phase, the right sizing and
streamlining of the cost structure at Finsch will be a priority
focus in FY 2019.
Capex:
FY 2018 Expansion Capex of US$42.3 million was mainly spent on
underground development and infrastructure relating to the Block 5
SLC.
Development Plan:
Petra's development plan at Finsch is due to increase higher
value ROM throughput from 3.1 Mt in FY 2018 to 3.2 Mt in FY 2019.
The Company will continue to assess plans to achieve its longer
term throughput target of 3.5 Mtpa at Finsch by investigating
options to safely reintroduce the SW Precursor from 73 Level or
increasing throughput rates from the Block 5 SLC. FY 2019 planned
tonnage from the SLC is ca. 2.7 Mt, with the remaining tonnes to be
sourced from the ROM overburden dumps.
The SW Precursor is a smaller ancillary orebody (ca. 1.2 ha in
size, compared to the main orebody of ca. 4.7 ha), which contains
ca. 3 Mt of ore above 63 Level and another ca. 3 Mt between 63
Level and 73 Level. The relatively small size and its proximity to
the main pipe affects the ability to induce continuous caving and
the stability of the rim tunnel.
Finsch's ROM grade of 62.5 cpht in FY 2018 was higher than
guidance primarily due to the contribution of high grade surface
overburden dumps. The ROM grade is expected to reduce to within the
guidance range of 56 - 59 cpht for FY 2019, mainly due to the
depletion of these high grade overburden dumps from FY 2019,
although partially offset by the increased ramp up of the Block 5
SLC.
Limited tailings production of ca. 200,000 tonnes is planned for
FY 2019, which includes mostly remnants from the higher grade
pre-79 tailings. While tailings production post FY 2019 does not
form part of the current mine plan, lower grade post-79 tailings
material remains available to supplement the underground operations
in the future.
Mining is currently ramping up in the new Block 5 SLC over four
levels from 70 Level to 78 Level and this is expected to deliver
ca. 2.7 Mt in FY 2019.
Cullinan - South Africa
Unit FY 2018 FY 2017 Variance
Sales
-------- ---------- ---------- -----------
Revenue US$M 167.0 91.3 +83%
-------- ---------- ---------- -----------
Diamonds sold Carats 1,335,669 760,957 +76%
-------- ---------- ---------- -----------
Average price per carat US$ 125 120 +4%
-------- ---------- ---------- -----------
ROM Production
-------- ---------- ---------- -----------
Tonnes treated Tonnes 3,741,086 1,882,911 +99%
-------- ---------- ---------- -----------
Diamonds produced Carats 1,342,020 679,622 +97%
-------- ---------- ---------- -----------
Grade(1) Cpht 35.9 36.1 -1%
-------- ---------- ---------- -----------
Tailings Production
-------- ---------- ---------- -----------
Tonnes treated Tonnes 412,749 506,176 -18%
-------- ---------- ---------- -----------
Diamonds produced Carats 26,700 106,887 -75%
-------- ---------- ---------- -----------
Grade(1) Cpht 6.5 21.1 -69%
-------- ---------- ---------- -----------
Total Production
-------- ---------- ---------- -----------
Tonnes treated Tonnes 4,153,835 2,389,087 +74%
-------- ---------- ---------- -----------
Diamonds produced Carats 1,368,720 786,509 +74%
-------- ---------- ---------- -----------
Costs
-------- ---------- ---------- -----------
On-mine cash cost per
tonne treated ZAR 239 316 -24%
-------- ---------- ---------- -----------
Capex
-------- ---------- ---------- -----------
Expansion Capex US$M 56.2 120.9 -54%
-------- ---------- ---------- -----------
Sustaining Capex US$M 6.5 4.3 +51%
-------- ---------- ---------- -----------
Borrowing Costs Capitalised US$M 11.2 26.0 -57%
-------- ---------- ---------- -----------
Total Capex US$M 73.9 151.2 -51%
-------- ---------- ---------- -----------
Notes:
1. The Company is not able to precisely measure the ROM /
tailings grade split because ore from both sources is processed
through the same plant; the Company therefore back-calculates the
grade with reference to resource grades.
Cullinan's production increased 74% to 1,368,720 carats (FY
2017: 786,509 carats) mainly due to a 97% increase in ROM carat
production as the new C-Cut Phase 1 block cave continued to ramp up
and the new plant operated at planned throughput rates. Production
from the undiluted C-Cut mining areas (including CC1E) increased to
ca. 2.46 Mt in FY 2018 (FY 2017: ca. 1.2 Mt).
Plant optimisation is ongoing, with the recovered ROM grade
improving from ca. 33 cpht achieved in H1 FY 2018 to 37.8 cpht for
H2 FY 2018, with Q4 FY 2018 yielding a grade of 39.3 cpht, in line
with revised guidance of 37 - 42 cpht for H2. A total of 0.4 Mt of
tailings were treated with an average grade of 6.5 cpht.
Cullinan's revenue increased by 83% to US$167.0 million for the
Year (FY 2017: US$91.3 million), due to higher sales volumes
following the commissioning of the new plant coupled with an
increase in underground tonnes mined.
Costs:
The on-mine unit cash cost per total tonne treated was ZAR239/t,
a decrease of 24% from FY 2017 (ZAR316/t), mainly due to the
increase in total tonnes treated as a result of the new plant being
fully commissioned in FY 2018.
Capex:
FY 2018 Expansion Capex of US$56.2 million was mainly spent on
the C-Cut Phase 1, CC1E and finalisation of the new plant. FY 2019
expansion capex for Cullinan is guided at ca. US$45 million,
primarily relating to the installations of the final C-Cut Phase 1
drawpoints and the shaft / plant interface.
Development Plan:
1.0 Mt ROM were hoisted and treated in Q4 FY 2018, which
demonstrates the strong progress and capability of the Cullinan
operations. However, the Company is guiding for a range of 3.7 -
4.0 Mt to be treated during FY 2019, due to the continued ramp-up
of C-Cut Phase 1, the depletion of the old B Block mining areas and
the switch-over period required for the implementation of the new
shaft / plant interface, which is scheduled to be completed by Q3
FY 2019. This will aid in alleviating constraints with the link
between the underground hoisting system and the plant.
The C-Cut Phase 1 project is planned to contribute ca. 3 Mt for
FY 2019. A further 0.7 - 1.0 Mt will be sourced predominantly from
the CC1E mining area, as well as from other B Block tonnes. Steady
state production of 4.0 Mtpa will be delivered from C-Cut Phase 1
and CC1E from FY 2020 onwards.
The ROM grade at Cullinan is expected to remain in the 38 - 42
cpht range from FY 2019 onwards. Tailings production is planned at
ca. 1.5 - 1.7 Mt yielding 6 - 7 cpht, whilst the plant optimisation
(total throughput in relation to mill settings and recirculating
load) is ongoing. Longer term steady state tailings production is
expected to be ca. 2 Mtpa, yielding 6 - 7 cpht.
Cullinan contains a 'Tier 1' diamond resource of 190.3 Mcts
(including 17.3 Mcts in tailings) and the Company will on an
ongoing basis investigate the optimal plan to utilise the full
extent of the large Cullinan orebody (ca. 16 ha at current
production depths).
Koffiefontein - South Africa
Unit FY 2018 FY 2017 Variance
Sales
-------- ---------- ---------- -----------
Revenue US$M 27.2 28.4 -4%
-------- ---------- ---------- -----------
Diamonds sold Carats 51,936 56,068 -7%
-------- ---------- ---------- -----------
Average price per carat US$ 525 506 +4%
-------- ---------- ---------- -----------
ROM Production
-------- ---------- ---------- -----------
Tonnes treated Tonnes 649,259 667,821 -3%
-------- ---------- ---------- -----------
Diamonds produced Carats 52,537 51,173 +3%
-------- ---------- ---------- -----------
Grade Cpht 8.1 7.7 +6%
-------- ---------- ---------- -----------
Total Production
-------- ---------- ---------- -----------
Tonnes treated Tonnes 649,259 667,821 -3%
-------- ---------- ---------- -----------
Diamonds produced Carats 52,537 51,173 +3%
-------- ---------- ---------- -----------
Costs
-------- ---------- ---------- -----------
On-mine cash cost per
tonne treated ZAR 596 532 +12%
-------- ---------- ---------- -----------
Capex
-------- ---------- ---------- -----------
Expansion Capex US$M 9.6 13.3 -28%
-------- ---------- ---------- -----------
Sustaining Capex US$M 2.7 5.5 -51%
-------- ---------- ---------- -----------
Total Capex US$M 12.3 18.8 -35%
-------- ---------- ---------- -----------
ROM production at Koffiefontein increased 3% to 52,537 carats
(FY 2017: 51,173 carats) further to the commissioning of the new
ground handling system during Q3 FY 2018, which enabled the
subsequent ramp up of tonnages in Q4 and allowed the mine to reach
its revised guidance of ca. 0.65 - 0.7 Mt for FY 2018.
During May and June 2018, ca. 187,000 tonnes were hoisted, in
line with the mine's FY 2019 annualised targeted throughput of 1.0
Mtpa. Tonnages achieved in the first two months of FY 2019 were
also in line with this target.
Revenue decreased 4% to US$27.2 million (FY 2017: US$28.4
million) for the Year due to lower production and sales
volumes.
Costs:
The on-mine cash unit cost of ZAR596/t, an increase of 12% from
FY 2017 (ZAR 532/t), mainly due to a reduction in the treatment of
ROM tonnes and the effect of a high fixed cost base associated with
mining operations.
Capex:
Capex of US$12.3 million mainly relate to the SLC project. FY
2019 expansion capex is guided at ca. US$5 million, primarily
relating to blue (kimberlite) tunnel development in the SLC.
Development Plan:
Petra's current mine plan has a life to 2031, but the residual
resources at the mine indicate that the actual LOM could be in
excess of 20 years.
Koffiefontein's expansion programme entails the development of
an SLC from 560mL to 600mL, before putting in place a new block
cave at approximately 720mL. However, the Company's ongoing review
of its future capital requirements may result in a continuation of
the SLC to deeper levels, in preference to the installation of the
block cave currently included in the Company's mine plan. The SLC
is expected to maintain the throughput rates achieved in May and
June 2018 and deliver ROM throughput of ca. 1.0 Mtpa at an average
grade of 7.5 - 8.0 cpht for FY 2019.
Williamson - Tanzania
Unit FY 2018 FY 2017 Variance
Sales
-------- ----------- ---------- -----------
Revenue US$M 68.5 58.4 +17%
-------- ----------- ---------- -----------
Diamonds sold Carats 253,524(1) 226,110 +12%
-------- ----------- ---------- -----------
Average price per carat US$ 270 258 +5%
-------- ----------- ---------- -----------
ROM Production
-------- ----------- ---------- -----------
Tonnes treated Tonnes 4,659,563 3,667,781 +27%
-------- ----------- ---------- -----------
Diamonds produced Carats 328,681 212,215 +55%
-------- ----------- ---------- -----------
Grade Cpht 7.0 5.8 +22%
-------- ----------- ---------- -----------
Alluvial Production
-------- ----------- ---------- -----------
Tonnes treated Tonnes 385,721 403,811 -4%
-------- ----------- ---------- -----------
Diamonds produced Carats 12,421 12,987 -4%
-------- ----------- ---------- -----------
Grade Cpht 3.2 3.2 -
-------- ----------- ---------- -----------
Total Production
-------- ----------- ---------- -----------
Tonnes treated Tonnes 5,045,284 4,071,592 +24%
-------- ----------- ---------- -----------
Diamonds produced Carats 341,102 225,202 +51%
-------- ----------- ---------- -----------
Costs
-------- ----------- ---------- -----------
On-mine cash cost per
tonne treated US$ 10.7 11.6 -8%
-------- ----------- ---------- -----------
Capex
-------- ----------- ---------- -----------
Expansion Capex US$M 2.6 14.1 -82%
-------- ----------- ---------- -----------
Sustaining Capex US$M 2.0 0.9 +122%
-------- ----------- ---------- -----------
Total Capex US$M 4.6 15.0 -69%
-------- ----------- ---------- -----------
Note:
1. Negatively impacted by the 71,654 carat parcel blocked for export.
The mine performed well operationally with production up 51% to
341,102 carats (FY 2017: 225,202 carats), being the highest level
of production achieved by the mine in over 40 years. This is
despite operations being negatively impacted by liquidity
constraints due to the parcel of 71,654.45 carats that remains
blocked for export and the overdue VAT receivables with a carrying
value of ca. US$20.3 million.
Revenue increased 17% to US$68.5 million (FY 2017: US$58.4
million) due to higher production and sales.
Costs:
The on-mine cash cost of US$10.7/t (FY 2017: US$11.6/t), reduced
by 8%, mainly due to the increase in volumes treated having a
positive impact due to the high fixed cost base associated with
mining operations.
Capex:
FY 2018 capex of US$4.6 million mainly related to waste
stripping and the construction of the slimes dam. Total capex is
guided at US$5 million for FY 2019, primarily related to waste
stripping. This level of capex is funded from the mine's own
cashflow and could be adjusted when issues relating to the blocked
parcel and VAT are resolved.
Development Plan:
ROM throughput is planned at ca. 4.7 Mt at a grade of ca. 6.75 -
7 cpht for FY 2019, supplemented by alluvial production of ca. 0.4
Mt at a grade of ca. 2.5 cpht.
KEM JV - South Africa (all figures reflect Petra's 75.9%
attributable share)
A binding Heads of Agreement was reached post Year end with
regards to the disposal of the Company's interest in the KEM JV to
the Company's joint venture partner Ekapa Mining for ca. ZAR300
million (ca. US$18.6 million), receivable in instalments from
January 2019 to December 2020.
Unit FY 2018(1) FY 2017 Variance
Sales
-------- ------------- ---------- -----------
Revenue US$M 81.6 82.3 -1%
-------- ------------- ---------- -----------
Diamonds sold Carats 756,493 821,963 -8%
-------- ------------- ---------- -----------
Average price per carat US$ 108 100 +8%
-------- ------------- ---------- -----------
ROM Production
-------- ------------- ---------- -----------
Tonnes treated Tonnes 768,776 597,025 +29%
-------- ------------- ---------- -----------
Diamonds produced Carats 82,246 87,783 -6%
-------- ------------- ---------- -----------
Grade Cpht 10.7 14.7 -27%
-------- ------------- ---------- -----------
Tailings Production
-------- ------------- ---------- -----------
Tonnes treated Tonnes 6,050,991 6,153,657 -2%
-------- ------------- ---------- -----------
Diamonds produced Carats 693,399 712,651 -3%
-------- ------------- ---------- -----------
Grade Cpht 11.5 11.6 -1%
-------- ------------- ---------- -----------
Total Production
-------- ------------- ---------- -----------
Tonnes treated Tonnes 6,819,767 6,750,682 +1%
-------- ------------- ---------- -----------
Diamonds produced Carats 775,645 800,434 -3%
-------- ------------- ---------- -----------
Costs
-------- ------------- ---------- -----------
On-mine cash cost per
tonne treated ZAR 153 133 +15%
-------- ------------- ---------- -----------
Capex
-------- ------------- ---------- -----------
Expansion Capex US$M 10.1 23.9 -58%
-------- ------------- ---------- -----------
Sustaining Capex US$M 3.7 4.5 -18%
-------- ------------- ---------- -----------
Total Capex US$M 13.8 28.4 -51%
-------- ------------- ---------- -----------
Notes:
1. Data represent Petra's 75.9% attributable share (including
both ROM production from Kimberley Underground and Tailings
production).
Petra's attributable production decreased 3% to 775,645 carats
for the Year (FY 2017: 800,434 carats), with ROM production
decreasing 6% to 82,246 carats (FY 2017: 87,783 carats). This was
below guidance due to a combination of factors including the labour
disruption experienced in Q1 FY 2018, project delays and the mud
rush incident at Bultfontein which has led to the early closure of
this underground mining area.
Tailings production decreased 3% to 693,399 carats (FY 2017:
712,651 carats) further to the severe rain storms during Q3 FY 2018
restricting access to higher grade dumps.
Revenue saw a very slight decrease, of 1% to US$81.6 million (FY
2017: US$82.3 million) as a decrease in sales was offset by an 8%
increase in the average price per carat to US$108 (FY 2017:
US$100).
Costs:
The on-mine cash unit cost increased 15% to ZAR153/t (FY 2016:
ZAR133/t), higher than expected due to additional security and
other costs associated with illegal mining activities which
effected certain of KEM JV's surface operations.
Capex:
Capex of US$13.8 million was in line with guidance.
EXPLORATION
As Petra continued to focus on the ramp up of its development
programmes at its producing operations, only limited budget was
committed to exploration in FY 2018 of US$0.6 million (this was
also the case in FY 2017, with US$0.6 million spent). All
exploration programmes are currently under review.
SAFETY
Petra's overriding concern is the health and safety of both its
employees and contractors and the Company is committed to achieving
a zero harm work environment. Petra aims to have a deeply-ingrained
safety culture, backed up by effective systems and processes, with
managers through all levels of the business leading by example.
The Group's LTIFR for the Year improved to 0.23 (FY 2017:
0.27).
GROSS RESERVES & RESOURCES
Petra manages one of the world's largest diamond resources of
ca. 290 million carats. This major resource implies that the
potential mine lives of Petra's core assets could be considerably
longer than the current mine plans in place at each operation, or
could support significantly higher production rates.
Gross Resources
As at 30 June 2017, the Group's gross Diamond Resources
(inclusive of Reserves) decreased 4.8% to 290.48 Mcts (30 June
2017: 304.97 Mcts), due to depletion by mining activity at all
operations and the proposed disposal of Petra's interest in KEM JV.
A new Resource estimation exercise for Cullinan is currently in
progress.
Gross Reserves
The Group's gross Diamond Reserves decreased 16.1% to 42.92 Mcts
(30 June 2016: 51.13 Mcts) due to depletions at all operations, the
exclusion of the KEM JV Reserves, and a reduction in the recovered
grade in the Cullinan Life Of Mine ("LOM") planning, as a result of
the revised grade guidance issued at the time of the H1 FY 2018
Trading Update.
The following table summarises the gross Reserves and Resources
status of the combined continuing Petra Group operations as at 30
June 2018.
Gross
Tonnes Grade Contained Diamonds
Category (millions) (cpht) (Mcts)
------------ -------- -------------------
Reserves
------------ -------- -------------------
Proved - - -
------------ -------- -------------------
Probable 93.9 45.7 42.92
------------ -------- -------------------
Sub-total 93.9 45.7 42.92
------------ -------- -------------------
Resources
------------ -------- -------------------
Measured 0.2 263.9 0.60
------------ -------- -------------------
Indicated 396.1 52.9 209.50
------------ -------- -------------------
Inferred 1,308.6 6.1 80.38
------------ -------- -------------------
Sub-total 1,704.9 17.0 290.48
------------ -------- -------------------
Note:
See www.petradiamonds.com for mine by mine detail.
CORPORATE
Rights Issue
On 24 May 2018, the Company announced a 5 for 8 Rights Issue to
raise net proceeds of ca. US$170 million via the issuance of
332,821,725 Rights Issue Shares at an Issue Price of 40 pence per
share. The main driver for the fundraise was to accelerate a
reduction in leverage to a more sustainable level, with the Board
setting a target of Consolidated Net Debt to Consolidated EBITDA of
2x or less by the end of FY 2020, and to enable management to focus
on ongoing operational delivery and optimisation, as well as to
assist in mitigating short-term issues relating to currency
volatility and other ongoing business challenges.
On 13 June 2018, shareholders approved the Rights Issue, with
over 99% of votes cast in favour of the transaction and on 29 June
2018, the Company announced that it had received valid acceptances
representing ca. 95% of the total number of Rights Issue Shares
offered to shareholders. The remaining ca. 5% of Rights Issue
Shares were subsequently placed with institutions on the same day
at a price of 52.25 pence per share. Petra's number of shares in
issue is now 865,336,485. All directors who are shareholders took
up their rights in full and hold 3.8% of the Company's issued share
capital.
Further to the receipt of the funds from the Rights Issue, the
Company utilised ca. US$107 million to fully pay down outstanding
drawn indebtedness with its South African Lending Group post Year
end, (thereby realising cash interest savings of ca. US$10 - 12
million per annum), whilst retaining both of these facilities.
South African Mining Legislation
On 15 June 2018, the South African Department of Mineral
Resources gazetted a revised draft Mining Charter which was open
for comments from stakeholders until 31 August 2018. The Minerals
Council South Africa, which represents the South African mining
industry and of which Petra is a member, has provided submissions
in relation to the draft Charter. Petra welcomes ongoing engagement
with the Minister through the Minerals Council in relation to the
finalisation of the Mining Charter.
On 22 August 2018 the Minister of Mineral Resources informed
Parliament's Mineral Resources Portfolio Committee of his intention
to withdraw the Mineral and Petroleum Resources Development
Amendment Bill. Removal of the uncertainty around changes to
legislation in this regard has been endorsed by the mining
industry.
Update on Tanzania
In Tanzania, Petra is in ongoing dialogue with the Government
and local advisers in relation to recent legislative developments
and overdue VAT receivables. Petra also continues to communicate
with the Government in relation to the blocked parcel of diamonds
from Williamson.
AGM
In advance of the AGM on 23 November 2018, Petra would like to
remind shareholders that the Company has decided to move to a more
digital approach to voting and therefore requests that all
shareholders vote electronically. The Company will not be sending
paper proxy forms and instead, shareholders can vote either via the
shareholder portal or, for CREST holders, via the CREST Network.
Voting in this way is cost effective, efficient and mitigates the
risk of lost items via postal systems thus ensuring your vote is
received and recorded. Shareholders who still wish to receive a
hard copy proxy card should contact Link Market Services to obtain
this. Link's contact details can be found here:
https://www.petradiamonds.com/investors/advisers/.
OUTLOOK
The Company's capital programmes have required major underground
development work at each of the South African assets, significant
pit re-shaping at Williamson in Tanzania and substantial processing
changes across each of the mines, including the construction of a
new fit-for-purpose plant at Cullinan and the rebuilding of the
existing plant at Williamson. Over the period FY 2006 to FY 2018,
Petra has produced a total of 27.4 million carats, generating
revenue of approximately US$3.6 billion, operating cashflow of
US$1.2 billion and thereby facilitating capital investment of
approximately US$1.7 billion. This significant investment period
has resulted in the Company's annual production growing from circa
175,000 carats to 4.6 Mcts and its annual revenue growing from
US$21.0 million to US$576.4 million (including KEM JV).
As Petra now approaches the final stage of its expansion plans,
it is positioned to reap the benefits of this capital intensive
phase by moving the focus to cost efficient production from the new
undiluted mining blocks, with a reduced capital spend profile.
Petra remains on track to generate free cash flow, enabling the
Company to achieve a reduction in leverage to its target of two
times or less consolidated net debt to consolidated EBITDA by the
end of FY 2020.
Johan Dippenaar
Chief Executive
17 September 2018
Notes
1. The following exchange rates have been used for this
announcement: average for the Year US$1:ZAR12.86 (30 June 2017:
US$1: ZAR13.59); closing rate as at 30 June 2018 US$1:ZAR13.73 (30
June 2017 US$1:ZAR13.05).
2. The following definitions have been used in this announcement:
a. ct: carat
b. cpht: carats per hundred tonnes
c. Mctpa: million carats per annum
d. Mcts: million carats
e. mL: metre level
f. Mt: million tonnes
g. Mtpa: million tonnes per annum
h. ROM: run-of-mine, i.e. relating to production from the primary orebody
i. SLC: sub-level cave, a variation of block caving
APPIX
The below operational results include KEM JV and are provided
for reference only:
Combined operations (Including KEM JV)
Unit FY 2018(1) FY 2017(1) Variance
Sales
-------- ----------- ----------- ---------
Diamonds sold Carats 4,550,292 4,006,856 +14%
-------- ----------- ----------- ---------
Revenue US$M 576.4 477.0 +21%
-------- ----------- ----------- ---------
Production
-------- ----------- ----------- ---------
ROM tonnes Mt 12.9 10.1 +29%
-------- ----------- ----------- ---------
Tailings & other tonnes Mt 7.7 8.7 -12%
-------- ----------- ----------- ---------
Total tonnes treated Mt 20.6 18.8 +10%
-------- ----------- ----------- ---------
ROM diamonds Carats 3,731,951 2,849,247 +31%
-------- ----------- ----------- ---------
Tailings & other(2)
diamonds Carats 879,531 1,163,966 -24%
-------- ----------- ----------- ---------
Total diamonds Carats 4,611,482 4,013,213 +15%
-------- ----------- ----------- ---------
On mine cash costs US$M 341.6 287.3 +19%
-------- ----------- ----------- ---------
Capex
-------- ----------- ----------- ---------
Expansion US$M 120.8 230.5 -48%
-------- ----------- ----------- ---------
Sustaining US$M 22.6 24.1 -6%
-------- ----------- ----------- ---------
Borrowing Costs Capitalised US$M 15.2 44.1 -64%
-------- ----------- ----------- ---------
Total operational capex US$M 158.6 298.7 -47%
-------- ----------- ----------- ---------
Note:
1. Production, sales and Capex stated on an attributable basis, including 75.9% of KEM JV
2. 'Other' represents alluvial diamond mining at Williamson.
PETRA DIAMONDS LIMITED - PRELIMINARY ANNOUNCEMENT
UNAUDITED CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 30 JUNE 2018
US$ million Notes Restated
2018 2017(1)
----------------------------------------------- ------ -------- ---------
Revenue 495.3 394.8
Mining and processing costs (418.6) (305.1)
Other direct income 1.2 1.7
Exploration expenditure (0.7) (0.8)
Corporate expenditure 5 (10.4) (11.2)
Impairment charge - Koffiefontein 16 (66.0) -
Total operating costs (494.5) (315.4)
Financial income 6 8.5 11.4
Financial expense 6 (94.3) (47.8)
----------------------------------------------- ------ -------- ---------
(Loss) / profit before tax (85.0) 43.0
Income tax charge (13.8) (26.9)
----------------------------------------------- ------ -------- ---------
(Loss) / profit for the year from continuing
operations (98.8) 16.1
(Loss) / profit on discontinued operations
including associated impairment charges (net
of tax) 17 (104.3) 4.6
----------------------------------------------- ------ -------- ---------
(Loss) / profit for the Year (203.1) 20.7
----------------------------------------------- ------ -------- ---------
Attributable to:
Equity holders of the parent company (166.9) 18.3
Non-controlling interest (36.2) 2.4
----------------------------------------------- ------ -------- ---------
(203.1) 20.7
----------------------------------------------- ------ -------- ---------
(Loss) / profit per share attributable to
the equity holders of the parent during the
Year:
From continuing operations:
Basic (loss) / profit per share - US$ cents 13 (15.85) 3.14
Diluted (loss) / profit per share - US$ cents 13 (15.85) 3.11
From continuing and discontinued operations:
Basic (loss) / profit - US$ cents 13 (31.29) 3.14
Diluted (loss) / profit - US$ cents 13 (31.29) 3.11
(1) Comparative results have been amended to reflect the results
of the KEM JV within the loss on discontinued operations (net of
tax) as per the requirements of IFRS 5, refer to Note 17.
PETRA DIAMONDS LIMITED - PRELIMINARY ANNOUNCEMENT
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 JUNE 2018
US$ million 2018 2017
-------------------------------------------------------- -------- ------
(Loss) / profit for the Year (203.1) 20.7
Exchange differences on translation of the share-based
payment reserve 1.3 (0.4)
Exchange differences on translation of foreign
operations(1,2) (41.3) 68.7
Exchange differences on non-controlling interest(1) (5.3) 9.3
Total comprehensive (expense) / income for the
Year (248.4) 98.3
--------------------------------------------------------- -------- ------
Total comprehensive income and expense attributable
to:
Equity holders of the parent company (206.9) 86.6
Non-controlling interest (41.5) 11.7
------------------------------------------------------ -------- -----
(248.4) 98.3
----------------------------------------------------- -------- -----
(1) These items will be reclassified to the consolidated income
statement if specific future conditions are met.
(2) The Company has disclosed the net assets of the KEM JV under
non-current assets held for sale and liabilities directly
associated with non-current assets held for sale in the Statement
of Financial Position. Upon completion of the transaction, amounts
included in the foreign currency translation reserve of US$4.5
million in relation to KEM JV will be reclassified to the
Consolidated Income Statement and subject to the terms and
structure of the final disposal, the non-controlling interest will
be removed.
PETRA DIAMONDS LIMITED - PRELIMINARY ANNOUNCEMENT
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 30 JUNE 2018
US$ million Notes 2018 2017
------------------------------------------------------ ------ -------- --------
ASSETS
Non-current assets
Property, plant and equipment 7 1 244.2 1 441.3
Deferred tax asset - 5.9
BEE loans and receivables 12 64.7 35.0
Other receivables 20.3 17.8
------------------------------------------------------ ------ -------- --------
Total non-current assets 1 329.2 1 500.0
------------------------------------------------------ ------ -------- --------
Current assets
Trade and other receivables 99.4 75.5
Inventories 78.1 75.6
Cash and cash equivalents (including restricted
amounts) 236.0 203.7
------------------------------------------------------ ------ -------- --------
Total current assets 413.5 354.8
------------------------------------------------------ ------ -------- --------
Non-current assets classified as held for sale 17 46.5 -
------------------------------------------------------ ------ -------- --------
Total assets 1 789.2 1 854.8
------------------------------------------------------ ------ -------- --------
EQUITY AND LIABILITIES
Equity
Share capital 8 133.4 89.6
Share premium account 790.2 666.0
Foreign currency translation reserve (344.7) (303.4)
Share-based payment reserve 7.7 12.8
Other reserves (0.8) (0.8)
Accumulated (loss) / retained earnings (30.4) 129.5
------------------------------------------------------ ------ -------- --------
Attributable to equity holders of the parent company 555.4 593.7
Non-controlling interest 11.2 52.7
------------------------------------------------------ ------ -------- --------
Total equity 566.6 646.4
------------------------------------------------------ ------ -------- --------
Liabilities
Non-current liabilities
Loans and borrowings 9 601.2 598.5
BEE loans payable 12 110.5 99.5
Provisions 59.5 72.0
Deferred tax liabilities 139.2 143.1
------------------------------------------------------ ------ -------- --------
Total non-current liabilities 910.4 913.1
------------------------------------------------------ ------ -------- --------
Current liabilities
Loans and borrowings 9 153.6 158.6
Trade and other payables 130.8 136.7
------------------------------------------------------ ------ -------- --------
Total current liabilities 284.4 295.3
------------------------------------------------------ ------ -------- --------
Liabilities directly associated with non-current
assets classified as held for sale 17 27.8 -
------------------------------------------------------ ------ -------- --------
Total liabilities 1 222.6 1 208.4
------------------------------------------------------ ------ -------- --------
Total equity and liabilities 1 789.2 1 854.8
------------------------------------------------------ ------ -------- --------
PETRA DIAMONDS LIMITED - PRELIMINARY ANNOUNCEMENT
UNAUDITED CONSOLIDATED STATEMENT OF CASHFLOWS
FOR THE YEARED 30 JUNE 2018
US$ million Notes 2018 2017
--------------------------------------------------------- ------ -------- --------
(Loss) / profit before taxation for the Year from
continuing and discontinued operation (183.2) 46.5
Depreciation of property plant and equipment 135.7 79.6
Impairment charge 16 66.0 -
Impairment charge in relation to discontinued
operation 17 92.7 -
Movement in provisions (3.0) (0.6)
Fair value uplift on Kimberley Ekapa Mining Joint
Venture - (4.1)
Financial income 6 (8.9) (14.2)
Financial expense 6 95.6 49.5
Profit on disposal of property, plant and equipment - (0.3)
Share based payment provision 0.6 0.2
Operating profit before working capital changes 195.5 156.6
(Increase)/ decrease in trade and other receivables (76.8) 18.5
Increase/ (decrease) in trade and other payables 14.2 (5.4)
Increase in inventories (18.8) (9.5)
--------------------------------------------------------- ------ -------- --------
Cash generated from operations 114.1 160.2
Net realised gains / (losses) on foreign exchange
contracts 0.2 (3.8)
Finance expense (38.9) (3.9)
Income tax paid (7.5) -
Net cash generated from operating activities 67.9 152.5
--------------------------------------------------------- ------ -------- --------
Cashflows from investing activities
Acquisition of property, plant and equipment (including
capitalised cash interest paid of US$13.3 million
(30 June 2017 US$34.7 million)) (175.4) (282.9)
Proceeds from sale of property, plant and equipment 0.6 0.9
Loans advanced to BEE partners (31.0) (12.9)
Repayment from BEE partners - 0.5
Finance income 3.9 1.8
Net cash utilised in investing activities (201.9) (292.6)
--------------------------------------------------------- ------ -------- --------
Cashflows from financing activities
Proceeds from the issuance of share capital (net
of cash issue costs paid of US$6.5 million) 166.9 1.1
Increase in borrowings 35.6 798.8
Repayment of borrowings (32.8) (508.8)
Net cash generated from financing activities 169.7 291.1
--------------------------------------------------------- ------ -------- --------
Net increase in cash and cash equivalents 35.7 151.0
Cash and cash equivalents at beginning of the
Year 190.2 36.7
Effect of exchange rate fluctuations on cash held (2.9) 2.5
--------------------------------------------------------- ------ -------- --------
Cash and cash equivalents at end of the Year(1) 223.0 190.2
--------------------------------------------------------- ------ -------- --------
The cashflows specific to the discontinued operation (net of
tax) are included in the amounts above and are disclosed in Note
17.
(1) Cash and cash equivalents in the Consolidated Statement of
Financial Position includes restricted cash of US$14.4 million (30
June 2017: US$13.5 million) and unrestricted cash of US$221.6
million (30 June 2017: US$190.2 million) and excludes unrestricted
cash attributable to KEM JV of US$1.4 million (refer to note
17).
PETRA DIAMONDS LIMITED - PRELIMINARY ANNOUNCEMENT
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2018
(Unaudited) Share Share Foreign Share-based Hedging Retained Attributable Non-controlling Total
capital premium currency payment and earnings to the interest equity
account translation reserve other parent
US$ million reserve reserves
------------------------------------------------------------- -------- -------- ------------ ------------ --------- --------- ------------- ---------------- --------
At 1 July 2017 89.6 666.0 (303.4) 12.8 (0.8) 129.5 593.7 52.7 646.4
Loss for the Year - - - - - (166.9) (166.9) (36.2) (203.1)
Other comprehensive income / (expense) - - (41.3) 1.3 - - (40.0) (5.3) (45.3)
Transfer between reserves for exercise of employee options
and warrants - - - (7.0) - 7.0 - - -
Equity settled share based payments - - - 0.6 - - 0.6 - 0.6
Allotments during the Year:
* Ordinary shares - Rights issue (net of US$7.4 million
issue costs) 43.7 124.1 - - - - 167.8 - 167.8
* Share options exercised 0.1 0.1 - - - - 0.2 - 0.2
At 30 June 2018 133.4 790.2 (344.7) 7.7 (0.8) (30.4) 555.4 11.2 566.6
------------------------------------------------------------- -------- -------- ------------ ------------ --------- --------- ------------- ---------------- --------
PETRA DIAMONDS LIMITED - PRELIMINARY ANNOUNCEMENT
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2018
Share Share Foreign Share-based Hedging Retained Attributable Non-controlling Total
capital premium currency payment and earnings to the interest equity
account translation reserve other parent
US$ million reserve reserves
------------------------------- -------- -------- ------------ ------------ --------- --------- ------------- ---------------- -------
At 1 July 2016 88.6 665.2 (372.1) 14.4 (0.8) 109.1 504.4 42.4 546.8
Profit for the Year - - - - - 18.3 18.3 2.4 20.7
Non-controlling interest
acquired - - - - - 1.4 1.4 (1.4) -
Other comprehensive income /
(expense) - - 68.7 (0.4) - - 68.3 9.3 77.6
Transfer between reserves for
exercise of options - - - (0.7) - 0.7 - - -
Equity settled share based
payments - - - 0.2 - - 0.2 - 0.2
Allotments during the Year:
* Share options exercised 0.3 0.8 - - - - 1.1 - 1.1
* LTSP share grants 0.7 - - (0.7) - - - - -
------------------------------- -------- -------- ------------ ------------ --------- --------- ------------- ---------------- -------
At 30 June 2017 89.6 666.0 (303.4) 12.8 (0.8) 129.5 593.7 52.7 646.4
------------------------------- -------- -------- ------------ ------------ --------- --------- ------------- ---------------- -------
NOTES TO THE CONDENSED CONSOLIDATED PRELIMINARY FINANCIAL
STATEMENTS
FOR THE YEARED 30 JUNE 2018
1. GENERAL INFORMATION
Petra Diamonds Limited (the "Company"), a limited liability
company listed on the Main Market of the London Stock Exchange, is
registered in Bermuda with its Group management office domiciled in
the United Kingdom (effective 01 May 2017).) The Consolidated
Preliminary Financial Statements of the Company for the year ended
30 June 2018 comprise the Company and its subsidiaries, joint
operations and associates (together referred to as the
"Group").
2. ACCOUNTING POLICIES
The preliminary results, which are unaudited, do not include all
the notes of the type normally included in an annual financial
report. Accordingly, this unaudited preliminary report is to be
read in conjunction with the Annual Report for the year ended 30
June 2017, and any public announcements made by the Group during
the reporting period. The annual financial report for the year
ended 30 June 2017 was prepared in accordance with International
Financial Reporting Standards as adopted by the European Union
("IFRS's") and the accounting policies applied in this preliminary
report are consistent with the polices applied in the annual
financial report for the year ended 30 June 2017 unless otherwise
noted.
Accounting policy for Non-current assets held for sale and
discontinued operations
Where an operation within the Group is separately identified or
forms part of a separate reporting structure, the Group will
classify the asset as held for sale, in accordance with IFRS 5, if
management has committed to a plan to sell, the operation is
available for sale, an active search for a buyer is in place, the
disposal is highly probably within 12 months of classifying as held
for sale and completion of the disposal is unlikely to
significantly change. The KEMJV and Botswana exploration operations
met the criteria mentioned above and as such have been classified
as held for sale. The assets held for sale are measured at the
lower of their carrying amount and fair value less costs to sell.
An impairment loss is recognised for any initial or subsequent
write-down of the asset to fair value less costs to sell. A gain is
recognised for any subsequent increases in fair value less costs to
sell of an asset but not in excess of any cumulative impairment
loss previously recognised. A gain or loss not previously
recognised by the date of the sale of the non-current asset is
recognised at the date of derecognition. Non-current assets
classified as held for sale and the assets of an operation
classified as held for sale are presented separately from the other
assets in the statement of financial position. The liabilities of
an identified operation classified as held for sale are presented
separately from other liabilities in the statement of financial
position.
A discontinued operation is a component of the entity that has
been disposed of or is classified as held for sale and that
represents a separate major line of business or geographical area
of operations, is part of a single co-ordinated plan to dispose of
such a line of business or area of operations, or is a subsidiary
acquired exclusively with a view to resale. The results of
discontinued operations are presented separately in the statement
of profit or loss.
Unrealised foreign exchange gains and losses on historic
retranslation of the subsidiaries results into US Dollars are
recycled to the consolidated income statement upon completion of
the disposal. The non-controlling interest attributable to minority
shareholders is recycled to the consolidated income statement upon
completion of the disposal. The Group designates the results of
discontinued activities, including those of disposed subsidiaries,
separately in accordance with IFRS and reclassifies the results of
the operation in the comparative period from continuing to
discontinued operations. The Group does not consider mines held on
care and maintenance to be discontinued activities unless the mine
is abandoned.
Basis of preparation including going concern
Background
The Company's results for Year were adversely impacted due to
the impairments at Koffiefontein and KEM JV at the end of H1 FY
2018, strike action at Petra's South African operations (except
Cullinan) in Q1 FY 2018, the Williamson parcel which remains
blocked for export and therefore unsold, and the delays in ramp-up
of projects at Cullinan and Finsch.
As announced on 9 October 2017, the Group highlighted that it
was due to breach its EBITDA maintenance covenant measurements
related to its senior debt facilities for the period ending, and as
at, 31 December 2017. A waiver was received for the 31 December
2017 measurement period after calendar year end from the Company's
lender group (comprising Absa Bank Limited (acting through its
Corporate and Investment Banking division), FirstRand Bank Limited
(acting through its Rand Merchant Bank division), Investec Asset
Management Proprietary Limited and Nedbank Limited (acting through
its Corporate and Investment Banking division) (together, the
"Lender group"), coupled with the following:
- an increase of 1% in the interest rate charged on the banking
facilities in the event that the Company's Consolidated Net Debt is
greater than 2.5x but less than 3x Consolidated EBITDA and
- an increase of 2% in the interest rate charged on the banking
facilities in the event that the Company's Consolidated Net Debt is
less than or equal to 3x Consolidated EBITDA.
This applied retrospectively to the six month period ending 30
June 2018 and six monthly thereafter. Covenants for the 30 June
2018, 31 December 2018 and 30 June 2019 measurement periods with
reference to the Group's forecasts at date of this report, are
outlined below:
Covenant 30 June and 31 December 30 June 2019
2018
Consolidated Net Debt to Not more than 3.5x Not more than
Consolidated EBITDA 2.5x
------------------------ --------------
Consolidated EBITDA to Consolidated Not less than 3.0x Not less than
Net Finance Charges 4.0x
------------------------ --------------
During May 2018, as part of the Rights Issue process, a written
undertaking was received from the Lender group for the waiver of
the 30 June 2018 covenant measurement.
Forecasts and associated risks
The following have been key considerations for the Board during
the Year and to the date of this report:
-- the ongoing roll-out and ramp-up of the Group's expansion
projects, specifically the new Cullinan plant and C-Cut and the
Finsch SLC;
-- the initial production results from the Cullinan plant, and
the resultant impact on value and grade expectations (which remain
subject to the ongoing plant optimisation);
-- the impact of the Rand volatility on both liquidity and financial results;
-- the production shortfalls at Koffiefontein;
-- the impact of labour disruptions at certain of the Group's South African mines; and
-- the uncertainty surrounding the outlook for sale of the blocked Williamson parcel.
To address the above forecasts, associated risks, future
operational cashflows to be used to service debt repayments and
potential future covenant breaches, the Company raised funds in the
form of a 5 for 8 Rights Issue, wherein the Company issued
332,821,725 ordinary shares to shareholders at 40 pence. Post the
Year end, the proceeds of the Rights Issue were used to repay the
Revolving Credit and Working Capital facilities due to the Group's
Lender group post Year end, although these facilities were not
cancelled and remain available.
The Board has reviewed the Group's forecasts and sensitivities
for a period of at least 12 months from the date that the
Preliminary Financial Statements were approved, including both
forecast cashflows and covenants. In doing so, careful
consideration was given to potential risks to the forecasts,
including the matters above as applicable, with scenarios
subsequently assessed for: a) reduced diamond prices; b) reduced
value at Cullinan during the ramp up of the C-cut and optimisation
of the plant; c) potential volatility in the Rand; or d) increased
operating costs.
The forecasts indicate that the Group retains sufficient
liquidity from existing cash resources and operating cashflows,
without the need to utilise existing facilities, to meet its
liabilities as they fall due under the forecasts and reasonably
possible sensitivities. Under the base case, the Company forecasts
to maintain headroom against its financial covenants going forward.
Base case forecasts assume an average exchange rate of
ZAR13.40:US$1 but excludes the proceeds from the sale of the
blocked Williamson parcel during the forecast period.
Conclusion
The Board is cognisant of the scope and significance of the
projects undertaken to date, and the ongoing risks around ramp-up
and commissioning, coupled with the significant debt financing that
has been required to accompany this transformational expansion
programme alongside the macro-economic factors relating to the
industry.
However, subsequent to the receipt of the Rights Issue proceeds,
with the Cullinan plant having achieved nameplate capacity, and
Cullinan's C-Cut and Finsch's SLC in place and ramping up, the
Board is of the opinion that the fundamental business plan of the
Group is intact, given that the operations will be mining the
majority of their ROM tonnes from new, undiluted areas from FY 2019
onwards.
Based on this, alongside the Group's existing cash resources and
facilities, the Board remains satisfied that the liquidity headroom
remains adequate under the Group's current base case and reasonable
sensitivities. Furthermore, the Board recognises the Company has
some ability to preserve cash should it be required in the
short-term (for example, by deferring non-essential cash payments,
maintaining very tight control over costs and overhead, and by
potentially deferring certain elements of its capital expenditure
that are not essential to the current ramp-up plans).
Accordingly, the Board has concluded that the going concern
basis in the preparation of the unaudited condensed preliminary
financial statements remains appropriate and that there are no
material uncertainties that would cast doubt on that basis of
preparation.
The unaudited consolidated preliminary financial statements for
the year ended 30 June 2018 do not constitute statutory accounts
and have been drawn up using accounting policies and presentation
expected to be adopted in the Group's full financial statements for
the year ended 30 June 2018, which are not expected to be
significantly different to those set out in notes 1 - 37 of the
Group's audited financial statements for the year ended 30 June
2017, except in relation to the accounting policy for non-current
assets held for sale and discontinued operations.
The financial information for the year ended 30 June 2017 has
been extracted from the statutory accounts for that period. The 30
June 2017 statutory accounts have been restated to reflect the
results of the KEM JV within the loss on discontinued operations
(net of tax) in the Consolidated Income Statement as per the
requirements of IFRS 5, refer to Note 17. The auditors' report for
the year ended 30 June 2017 was unqualified and did not include
references to any matters to which the auditors drew attention by
way of emphasis without qualifying their report.
New standards and interpretations applied
The IASB has issued no new standards, amendments to published
standards and interpretations to existing standards with effective
dates on or prior to 1 July 2017 which have a material effect on
the Group.
New standards and interpretations not yet effective
Certain new standards, amendments and interpretations to
existing standards have been published that are mandatory for the
Group's accounting periods beginning after 1 July 2018 or later
periods, which the Group has decided not to adopt early or which
are yet to be European Union endorsed.
The only standards which are anticipated to be significant or
relevant to the Group are:
IFRS 15 Revenue from Contracts with Customers
The Group is required to apply IFRS 15 for the reporting period
beginning 1 July 2018. Management have assessed the core principle
of IFRS 15, that the Group will recognise revenue to depict the
transfer of promised diamond sales to customers in an amount that
reflects the consideration to which the Group expects to be
entitled in exchange for the diamond sales.
Diamond sales are made through a competitive tender process.
Diamond sales are recognised when significant risks and rewards of
ownership are transferred to the buyer, costs can be reliably
measured and receipt of tender proceeds probable - this is deemed
to be the point at which the tender is awarded. The Group has
reviewed the terms and conditions of the current tender contract
entered into with each of the buyers and are satisfied that, based
on the terms of the current contracts, there is no change to the
timing of revenue recognition on tender sales under IFRS 15.
Where the Group makes rough diamond sales to customers and
retains a vested right in the future sale of a polished diamond,
the Group will record such revenue only at the date when the
polished diamond is sold (and only its interest therein). The Group
has reviewed the terms and conditions of its current contracts
pertaining to such scenarios and is satisfied that there is no
change, based on the terms of the current contracts, to the timing
of revenue recognition on such sales under IFRS 15.
IFRS 16 Leases
IFRS 16 introduces a single lease accounting model. This
standard requires lessees to account for all leases under a single
on-balance sheet model. Under the new standard, a lessee is
required to recognise all lease assets and liabilities on the
balance sheet; recognise amortisation of leased assets and interest
on lease liabilities over the lease term; and separately present
the principal amount of cash paid and interest in the cashflow
statement. The requirements of IFRS 16 extend to certain service
contracts, such as mining contractors in which the contractor
provides services and the use of assets, which may impact the
Group. Accordingly, the Group is performing a review of relevant
contracts to complete an impact assessment.
IFRS 9 Financial Instruments
IFRS 9 "Financial instruments" addresses the classification and
measurement of financial assets and financial liabilities. The
complete version of IFRS 9 was issued in July 2014. It replaces the
guidance in IAS 39 that relates to the classification and
measurement of financial instruments. IFRS 9 retains but simplifies
the mixed measurement model and establishes three primary
measurement categories for financial assets: amortised cost, fair
value through other comprehensive income (OCI) and fair value
through profit or loss. The basis of classification depends on the
entity's business model and the contractual cashflow
characteristics of the financial asset. Investments in equity
instruments are required to be measured at fair value through
profit or loss with the irrevocable option at inception to present
changes in fair value in OCI. There is now a new expected credit
loss model that replaces the incurred loss impairment model used in
IAS 39. It is noted that VAT receivables are outside the scope of
this standard. For financial liabilities there were no changes to
classification and measurement except for the recognition of
changes in credit risk in other comprehensive income, for
liabilities designated at fair value through profit or loss. The
impact of IFRS 9 will be largely affected by the Group's hedge
accounting policies in place together with the assessment of
expected credit losses on financial assets such as the BEE trade
receivables. The Group is finalising its assessment however
Management do not expect IFRS 9 to have a material impact.
Significant assumptions and judgements:
The preparation of the condensed consolidated preliminary
financial statements requires management to make estimates and
judgements and form assumptions that affect the reported amounts of
the assets and liabilities, reported revenue and costs during the
periods presented therein, and the disclosure of contingent
liabilities at the date of the preliminary financial statements.
Estimates and judgements are continually evaluated and based on
management's historical experience and other factors, including
future expectations and events that are believed to be reasonable.
The estimates and assumptions that have a significant risk of
causing a material adjustment to the financial results of the Group
in future reporting periods are discussed below.
Key estimates and judgements:
Impairment reviews
The Group prepares impairment models and assesses mining assets
for impairment. While conducting an impairment review of its assets
using value in use impairment models using the current life of mine
plans, the Group exercised judgement in making assumptions about
future rough diamond prices, foreign exchange rates, volumes of
production, ore reserves and resources included in the current life
of mine plans, future development and production costs and factors
such as inflation and discount rates. Changes in estimates used can
result in significant changes to the 'Consolidated Income
Statement' and 'Statement of Financial Position'.
Koffiefontein
The impairment test at Koffiefontein resulted in the recognition
of an impairment charge of US$66.0 million on a carrying value of
property, plant and equipment of US$118.2 million. For further
details of the inputs, assumptions and sensitivities in the
impairment model refer to note 16.
KEM JV
See separate section below for details of the impairment charge
in relation to the KEM JV upon its classification to an asset held
for sale under IFRS 5.
Cullinan, Finsch and Williamson
The impairment test for Cullinan, Finsch and Williamson as at 30
June 2018 did not result in any impairment on the carrying value of
property, plant and equipment. For further details of the inputs,
assumptions and sensitivities in the impairment models refer to
note 16.
Recoverability of diamond parcel in Tanzania
The Group holds diamond inventory valued at lower of cost and
net realizable value of US$12.5 million (30 June 2017: US$ nil) in
the Statement of Financial Position in respect of the Williamson
mine's confiscated diamond parcel. During the Year, an
investigation into the Tanzanian diamond sector by a parliamentary
committee in Tanzania was undertaken to determine if diamond
royalty payments were being understated. In connection with this,
Petra announced on 11 September 2017 that a parcel of diamonds
(71,654.45 carats) from the Williamson mine in Tanzania (owned 75%
by Petra and 25% by the Government of the United Republic of
Tanzania ("GoT")) had been blocked for export to Petra's marketing
office in Antwerp.
The assessment of the recoverability of the diamond parcel
required significant judgement. In making such a judgement, the
Group considered their ongoing discussions with the GoT,
confirmation received from the GoT post Year-end that they still
hold the diamond parcel of 71,654.45 carats, an assessment of the
internal process used for the sale and export of diamonds
confirming such process is in full compliance with legislation in
Tanzania and the Kimberley Process and legal advice received from
the Group's in-country attorneys which supports the Group's
position,.
During the Year, Petra received authorisation from the GoT to
resume diamond exports and sales from Williamson and all subsequent
parcels of diamonds have been exported from Tanzania, for eventual
sale at the Company's marketing office in Antwerp. While a
resolution has not yet been reached with regards to the parcel of
diamonds that was blocked from export, based on the above
judgements and assessment thereof, management remain confident that
the diamond parcel will be released by GoT and will be available
for future sale.
Recoverability of VAT in Tanzania
The Group holds VAT receivables carried at US$20.3 million (30
June 2017: US$15.8 million) in the Statement of Financial Position
in respect of the Williamson mine, all of which is past due and the
receivables have been classified, after providing for a time-value
of money provision, as non-current given the potential delays in
receipt. Of the total VAT receivable, US$12.7 million (30 June
2017: US$15.8 million) relates to historic VAT pre July 2017. The
assessment of the carrying value of the VAT receivable under the
historic VAT legislation required significant judgement over the
timing of future payments, progress and finalisation of VAT audits,
ongoing discussions with the relevant authorities in Tanzania and
the wider operating environment.
A further US$7.6 million of VAT is receivable which relates to
VAT under the current legislation, effective from July 2017. The
assessment of the carrying value of the VAT receivable under the
current VAT legislation required significant judgement over the
timing of future payments, the definition of raw minerals under the
new VAT legislation, ongoing discussions with the relevant
authorities in Tanzania, legal advice and the wider operating
environment. Management have considered the current legislation and
consider that input VAT can continue be recovered in relation to
the export of rough diamonds, however note that the current
legislation is unclear. As such, Management consider the VAT
receivables under the new VAT legislation to be valid. Accordingly,
the Group is pursuing near term payment in accordance with
legislation.
While the total VAT balance is considered receivable,
uncertainty exists regarding the timing of receipt. Accordingly,
the receivable has been discounted by US$3.9 million (30 June 2017:
US$2.7 million) which required estimates as to the timing of future
receipts. A discount rate of 9.0% has been applied to the expected
cash receipts. A 1% increase in the discount rate would increase
the provision by US$0.3 million and a one year delay would increase
the provision by US$1.7 million.
Kimberley Ekapa Mining Joint Venture (30 June 2018)
In line with IFRS 5 and the Group's accounting policy for assets
held for sale and discontinued, the Kimberley Ekapa Mining Joint
Venture ("KEM JV") was classified as held for sale at the Year-end.
Judgement was required in determining the fair value adjustment on
reclassification of the KEM JV to non-current assets held for sale,
with regards to the purchase offer, received from Ekapa Mining, for
the Company's and its black economic empowerment ("BEE") partners'
75.9% interest. The fair value adjustment to property, plant and
equipment, non-current trade and other receivables and trade and
other receivables was to ensure the asset values of the KEM JV were
reflected at fair value based on the consideration receivable under
the purchase offer if the transaction completes. The accounting
treatment involved consideration of the structure of the
arrangement, the legal form and the contractual agreements between
the parties. Refer to note 17 for further details.
Kimberley Ekapa Mining Joint Venture (30 June 2017)
Judgement was applied in determining the fair value adjustments
in respect of the Kimberley Ekapa Mining Joint Venture ("KEM JV")
acquisition in the prior Year. The fair value adjustments to
mineral properties were to ensure the asset values for Petra's
incremental share in Ekapa Minerals (Pty) Ltd ("Ekapa Minerals")
and Petra's interest in Super Stone were reflected at fair value.
The Group has joint control over the KEM JV and recognises its
share of the assets, liabilities, income and expenses. The
accounting treatment involved consideration of the structure of the
arrangement, the legal form and the contractual agreements between
the parties.
BEE guarantee
The BEE partners obtained bank financing from ABSA, RMB and
Investec (the "BEE Lenders") to refinance amounts owing by the BEE
partners to Petra, which had provided funding to the BEE partners
to enable them to acquire their interests in Finsch and Cullinan.
As part of the refinancing the Group provided a guarantee to the
BEE Lenders over the repayment of loans advanced to the Group's BEE
partners. The BEE partners will settle their loan obligations with
the BEE Lenders from their share of future operational cashflows,
either through repayment of the amounts owing to the BEE partners
by Petra or through recoverable advances provided by Petra from
Group treasury.
Judgement has been applied by management is assessing the risk
of the BEE partners defaulting under their obligations to the BEE
Lenders. Management have considered the Group's future cashflows
forecasts and its ability to meet planned forecast BEE partner
distributions. Accordingly management are of the opinion the risk
of default by the BEE partners to the BEE Lenders is remote (refer
to note 12 for further details).
Other key estimates and judgements
In addition to the key estimates and judgements disclosed above,
the following estimates and judgements have not significantly
changed from those disclosed in the FY 2017 Annual Report and will
be discussed in further detail in the FY 2018 Annual Report:
- Life of mine and ore reserves and resources
- Capitalisation of borrowing costs
- Provision for rehabilitation
- Inventory and inventory stockpile
- Depreciation
- Pension and post-retirement medical fund schemes
- Net investments in foreign operations
3. DIVIDS
No dividends have been declared in respect of the current Year
under review (30 June 2017: US$nil).
4. SEGMENTAL INFORMATION
Segment information is presented in respect of the Group's
operating and geographical segments:
Mining - the extraction and sale of rough diamonds from mining
operations in South Africa and Tanzania.
Exploration - exploration activities in Botswana.
Corporate - administrative activities in United Kingdom.
Segments are based on the Group's management and internal
reporting structure. Management reviews the Group's performance by
reviewing the results of the mining activities in South Africa and
Tanzania, reviewing the results of exploration activities in
Botswana and reviewing the corporate administration expenses in
United Kingdom. Each segment derives, or aims to derive, its
revenue from diamond mining and diamond sales, except for the
corporate and administration cost centre.
Segment results, assets and liabilities include items directly
attributable to a segment, as well as those that can be allocated
on a reasonable basis. Segment results are calculated after
charging direct mining costs, depreciation and other income and
expenses. Unallocated items comprise mainly interest-earning assets
and revenue, interest-bearing borrowings and expenses and corporate
assets and expenses. Segment capital expenditure is the total cost
incurred during the year to acquire segment assets that are
expected to be used for more than one period. Eliminations comprise
transactions between Group companies that are cancelled on
consolidation. The results are not materially affected by seasonal
variations. Revenues are generated from tenders held in South
Africa and Antwerp for external customers from various countries,
the ultimate customers of which are not known to the Group.
4. SEGMENTAL INFORMATION (continued)
Operating South Africa - Mining activities Care and Tanzania Botswana United South Africa
segments maintenance -Mining Kingdom
activities
Corporate
US$ million KEM and
Cullinan Finsch Koffiefontein JV(4,5) Helam Williamson Exploration(4) treasury Beneficiation(3) Inter-segment Consolidated
----------------- --------- ------- -------------- ----------- ------------ ----------- --------------- ---------- ----------------- -------------- -------------
2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018
----------------- --------- ------- -------------- ----------- ------------ ----------- --------------- ---------- ----------------- -------------- -------------
Revenue 167.0 231.9 27.2 - - 68.5 - - 25.5 (24.8) 495.3
Segment
result(1) 14.2 67.7 (12.5) - (1.7) 13.0 (0.7) (10.4) (1.0) (3.0) 65.6
Impairment
charge - - (66.0) - - - - - - - (66.0)
Other direct
income (0.2) 0.3 - - (0.4) 0.4 - - - 1.1 1.2
--------- ------- -------------- ----------- ------------ ----------- --------------- ---------- ----------------- -------------- -------------
Operating profit
/ (loss)(2) 14.0 68.0 (78.5) - (2.1) 13.4 (0.7) (10.4) (1.0) (1.9) 0.8
Financial income 8.5
Financial
expense (94.3)
Income tax
expense (13.8)
Loss on
discontinued
operation (net
of tax) (5) (104.3)
Non-controlling
interest 36.2
----------------- --------- ------- -------------- ----------- ------------ ----------- --------------- ---------- ----------------- -------------- -------------
Loss
attributable
to equity
holders
of the parent
company (166.9)
----------------- --------- ------- -------------- ----------- ------------ ----------- --------------- ---------- ----------------- -------------- -------------
Segment assets 727.3 557.4 135.8 - 7.2 211.3 - 3 323.8 13.0 (3 186.6) 1 789.2
Segment
liabilities 653.3 281.8 291.0 - 50.1 302.5 - 2 304.5 14.1 (2 702.6) 1 194.7
Capital
expenditure 73.9 54.0 12.3 - - 4.6 - 0.7 - - 145.5
----------------- --------- ------- -------------- ----------- ------------ ----------- --------------- ---------- ----------------- -------------- -------------
(1) Total depreciation of US$128.0 million included in the
segmental result, comprises depreciation incurred at Finsch US$41.7
million, Cullinan US$66.1 million, Koffiefontein US$9.1 million,
Williamson US$9.5 million, Helam US$0.7 million, Exploration US$0.1
million and Corporate administration US$0.8 million.
(2) Operating profit is equivalent to revenue of US$495.3
million less total costs of US$494.5 million as disclosed in the
Consolidated Income Statement.
(3) The beneficiation segment represents Tarorite, a cutting and
polishing business in South Africa, which can on occasion cut and
polish select rough diamonds.
(4) Assets of US$46.5 million and liabilities of US$27.8 million
in respect of KEM JV and the exploration assets in Botswana have
been classified as non-current assets held for sale (refer to note
17).
(5) The operating results in respect of KEM JV have been
reflected within loss on discontinued operation (refer to note
17).
4. SEGMENTAL INFORMATION (continued)
Operating South Africa - Mining activities Care and Tanzania Botswana United South Africa
segments maintenance -Mining Kingdom(4)
(Restated) activities
Corporate
US$ million and
Cullinan Finsch Koffiefontein KEM JV(6) Helam Williamson Exploration treasury Beneficiation(5) Inter-segment Consolidated
----------------- --------- ------- -------------- ---------- ------------ ----------- ------------ ----------- ----------------- -------------- -------------
2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017
----------------- --------- ------- -------------- ---------- ------------ ----------- ------------ ----------- ----------------- -------------- -------------
Revenue 91.3 216.7 28.4 - - 58.4 - - 0.3 (0.3) 394.8
Segment
result(1) 4.8 101.2 (11.0) - (2.5) (3.4) (0.8) (11.2) 1.1 (0.6) 77.6
Other direct
income - 0.5 0.1 - 0.3 0.5 - - - 0.4 1.8
--------- ------- -------------- ---------- ------------ ----------- ------------ ----------- ----------------- -------------- -------------
Operating profit
/ (loss)(2) 4.8 101.7 (10.9) - (2.2) (2.9) (0.8) (11.2) 1.1 (0.2) 79.4
Financial income 11.4
Financial
expense (47.8)
Income tax
expense (26.9)
Profit on
discontinued
operation (net
of tax) (6) 4.6
Non-controlling
interest (2.4)
----------------- --------- ------- -------------- ---------- ------------ ----------- ------------ ----------- ----------------- -------------- -------------
Profit
attributable
to equity
holders
of the parent
company 18.3
----------------- --------- ------- -------------- ---------- ------------ ----------- ------------ ----------- ----------------- -------------- -------------
Segment assets 828.7 661.6 248.0 212.1 5.0 171.1 0.9 3 214.0 7.4 (3 494.0) 1 854.8
Segment
liabilities 694.3 394.6 265.6 220.7 50.9 277.8 44.2 2 178.8 8.0 (2 926.5) 1 208.4
Capital
expenditure 151.2 85.6 18.8 28.4 -(3) 15.0 - 1.4 - (0.3)(3) 300.1
----------------- --------- ------- -------------- ---------- ------------ ----------- ------------ ----------- ----------------- -------------- -------------
(1) Total depreciation of US$79.6 million included in the
segmental result, comprises depreciation incurred at Finsch US$14.6
million, Cullinan US$31.6 million, Koffiefontein US$8.9 million,
KEM JV US$16.3 million, Williamson US$6.6 million, Helam US$0.6
million, Exploration US$0.2 million and Corporate administration
US$0.8 million.
(2) Operating profit is equivalent to revenue of US$394.8
million less total costs of US$315.4 million as disclosed in the
Consolidated Income Statement.
(3) Inter segment capital expenditure represents
work-in-progress at Helam of US$0.3 million in respect of the
manufacture of plant and equipment for other mines within the
Group.
(4) With effect from 01 May 2017 the Company was domiciled in
the United Kingdom.
(5) The beneficiation segment represents Tarorite, a cutting and
polishing business in South Africa, which can on occasion cut and
polish select rough diamonds.
(6) The operating results in respect of KEM JV have been
reflected within loss on discontinued operation (refer to note
17).
US$ million 2018 2017
------------------------------------------------------ ------- -------
5. CORPORATE EXPITURE
Corporate expenditure includes:
Depreciation of property, plant and equipment 0.7 0.8
London Stock Exchange and other regulatory expenses 1.4 1.1
Share-based expense - Directors 0.6 (0.3)
Other staff costs 3.6 3.8
------------------------------------------------------ ------- -------
Total staff costs 4.2 3.5
------------------------------------------------------ ------- -------
6. FINANCING EXPENSE
Restated
US$ million 2018 2017
---------------------------------------------------------- ------- ---------
Net unrealised foreign exchange gains - 8.6
Interest received on BEE loans and other receivables 4.1 1.1
Interest received bank deposits 3.5 1.7
Realised foreign exchange gains on the settlement
of foreign loans and forward exchange contracts(2) 0.9 -
Financial income 8.5 11.4
-------
Gross interest on bank loans and overdrafts (62.7) (48.0)
Interest on bank loans and overdrafts capitalised 15.2 44.1
------- ---------
Net interest expense on bank loans and overdrafts (47.5) (3.9)
Bond redemption premium and acceleration of
unamortised bond costs(1) - (22.3)
Other debt finance costs, including BEE loan
interest and facility fees (16.5) (13.9)
Unwinding of present value adjustment for rehabilitation
costs (4.1) (3.8)
Net unrealised foreign exchange losses(2) (26.2) -
Realised foreign exchange losses on the settlement
of foreign loans and forward exchange contracts - (3.9)
----------------------------------------------------------- ------- ---------
Financial expense (94.3) (47.8)
----------------------------------------------------------- ------- ---------
Net financial expense (85.8) (36.4)
----------------------------------------------------------- ------- ---------
(1) During FY 2017, the bond redemption premium and acceleration
of unamortised bond costs of US$22.3 million were in respect of
costs associated with the refinancing and early redemption of the
US$300 million Bond comprising unamortised upfront costs (US$7.3
million previously capitalised) and make-whole premium (US$15.0
million).
(2) The Group predominantly enters into hedge contracts where
the risk being hedged is the volatility in the South African Rand,
Pound Sterling and US Dollar exchange rates affecting the proceeds
in South African Rand of the Group's US Dollar denominated diamond
tenders. In the event of a capital raising, as was the case with
the recent Rights Issue, the Group may also enter into short dated
hedges to facilitate the conversion between functional currencies
across the Group as was the case with the settlement of the South
African lender facilities out of the Pound Sterling Rights Issue
proceeds shortly after Year end. The fair value of the Group's
hedges as at 30 June are based on Level 2 mark-to-market valuations
performed by the counterparty financial institutions. The contracts
are all short dated in nature and mature within the next 12 months.
An unrealised loss of US$26.2 million (FY 2017: US$8.6 million
gain) in respect of foreign exchange contracts held at year end
were mainly attributable to hedging the proceeds of the Rights
Issue and a realised foreign exchange gain of US$0.9 million (FY
2017: US$3.9 million loss) in respect of foreign exchange contracts
closed during the year is included in the net finance and expense
amount.
7. PROPERTY, PLANT AND EQUIPMENT
The net movement in property, plant and equipment for the Year
is a decrease of US$197.1 million (30 June 2017: US$362.0 million).
This is primarily as a result of:
- an increase in property, plant and equipment from capital
expenditure of US$159.3 million (30 June 2017: US$300.1 million),
which includes US$13.8 million (30 June 2017: US$28.4 million)
additions attributable to KEM JV;
- an increase in the rehabilitation asset of US$2.7 million (30 June 2017: US$nil), and
- the recognition of the incremental assets attributable to the
Group from the KEM JV of US$nil(30 June 2017: US$14.7 million)
offset by:
- the movement in the US$/ZAR foreign exchange rate resulting in
a foreign exchange decrease on Rand based assets of US$62.5 million
(30 June 2017: US$127.4 million decrease);
- depreciation of US$128.0 million (30 June 2017: US$79.6
million, including US$16.3 million attributable to KEM JV);
- the impairment of the Koffiefontein assets of US$66.0 million (30 June 2017: US$nil);
- the impairment of the KEM JV assets of US$77.0 million (30 June 2017: US$nil);
- the transfer of the remaining KEM JV assets to non-current
assets held for sale, of US$19.8 million (30 June 2017:
US$nil);
- the transfer of the exploration assets of US$0.7 million (30
June 2017: US$nil) to non-current assets held for sale; and
- assets of US$5.1 million (30 June 2017: US$0.6 million) disposed of during the Year.
8. SHARES ISSUED
Allotments during the Year ending 30 June 2018 were in respect
of:
(i) the issue of 332,821,725 ordinary shares to shareholders
pursuant to the Rights Issue. The Company raised gross proceeds of
US$175.2 million (GBP133.1 million) comprising share capital of
US$43.7 million (GBP33.3 million) and share premium of US$131.5
million (GBP99.8 million). The costs of US$7.4 million associated
with the Right Issues have been capitalised against share
premium;
(ii) the award to the Executive Directors of 136,519 ordinary
shares granted under the 2012 Performance Share Plan, in receipt of
performance measured over the period 1 July 2014 to 30 June
2017;
(iii) the award to the Executive Directors of 135,545 ordinary
shares granted under the 2015 deferred share awards based on the
annual performance bonus plan;
(iv) the exercise of 135,821 share options under the 2005
Executive Share Option Scheme by Directors and Senior Management;
and
(v) the award to David Abery (as per FY 2016 Remuneration
Committee minutes) share awards of 10,163 under the 2012
Performance Share Plan, in receipt of performance measured over the
period 1 July 2014 to 30 June 2017 and 110,494 ordinary shares
granted under the 2015 and 2016 deferred share awards based on the
annual performance bonus plan.
Further details with regards to the Group's share plans will be
provided in the Group's 2018 Annual Report.
9. LOANS AND BORROWINGS
US$ million 2018 2017
---------------------------------------------- ------ ------
Non-current liabilities
Loans and borrowings - Senior secured second
lien notes 601.2 598.5
----------------------------------------------- ------ ------
601.2 598.5
Current liabilities
Loans and borrowings - Senior secured lender
debt facilities 106.7 109.0
Loans and borrowings - Senior secured second
lien notes 46.9 49.6
----------------------------------------------- ------ ------
153.6 158.6
Total loans and borrowings - bank facilities 754.8 757.1
----------------------------------------------- ------ ------
a) Senior Secured Lender Debt Facilities
The Group's lending group (Absa Corporate and Investment Banking
("Absa"), FirstRand Bank Limited (acting through its Rand Merchant
Bank division) ("RMB"), and Nedbank Limited) and lending facilities
are detailed in the table below. There have been no amendments to
the facilities during the Year under review other than those
changes relating to the covenant ratios discussed below.
The Group's debt and hedging facilities are detailed in the
table below:
Senior Lender Debt Facilities 30 June 2018 30 June 2017(1)(&2)
Facility Facility
amount amount
---------------------------------------------- --------------- --------------------
ZAR Debt Facilities:
ZAR Lenders Amortising term facility (ATF)(1) ZARnil ZARnil
ZAR Lenders Revolving credit facility (RCF) ZAR1,000 ZAR1,000
million million
ZAR Lenders Working capital facility (WCF) ZAR500 million ZAR500 million
Absa/RMB - FX Hedging facilities ZAR300 million ZAR300 million
US$ Debt Facilities:
IFC - Amortising term facility (ATF)(1) US$nil US$nil
IFC - Revolving credit facility (RCF) (1) US$nil US$nil
---------------------------------------------- --------------- --------------------
(1) The ZAR Lenders ATF, the IFC ATF and RCF facilities were all
repaid during April 2017 (refer to b) below).
(2) The facilities were amended with effect from 12 April
2017.
The repayment terms and interest rates remained unchanged. The
terms and conditions will be detailed in the Group's FY 2018 Annual
Report.
The facilities are secured on the Group's interests in Finsch,
Cullinan, Koffiefontein, KEM JV and Williamson.
Subsequent to Year end, the revolving credit facility and
working capital facility were settled in full (refer note 18).
Covenant ratios
On 9 September 2017, agreement was reached with Petra's Lender
group to waive the two EBITDA maintenance measurement covenant
tests relating to its senior debt facilities for the 12-month
period to, and as at 30 June 2017. The lender group further agreed
to revised covenant ratios relating to EBITDA for the 12-month
measurement period to 31 December 2017 as follows:
(i) the interest cover ratio is changed to no less than 2.7x (previously 3.85x); and
(ii) the net debt to EBITDA ratio is changed to no more than 4.0:1 (previously 2.80:1).
As announced on 9 October 2017, the Group highlighted that it
was due to breach its EBITDA maintenance covenant measurements
related to its senior debt facilities for the period ending, and as
at, 31 December 2017 and a waiver was received for the 31 December
2017 measurement period after calendar year end from the Company's
Lender group, coupled with the following:
- an increase of 1% in the interest rate charged on the banking
facilities in the event that the Company's Consolidated Net Debt is
greater than 2.5x but less than 3x Consolidated EBITDA and
- an increase of 2% in the interest rate charged on the banking
facilities in the event that the Company's Consolidated Net Debt is
less than or equal to 3x Consolidated EBITDA.
This will apply retrospectively to the six month period ending
30 June 2018 and six monthly thereafter, as applicable.
Furthermore, covenants for the 30 June 2018, 31 December 2018
and 30 June 2019 measurement periods, were set at the following
levels:
Covenant 30 June and 31 December 30 June 2019
2018
Consolidated Net Debt to Not more than 3.5x Not more than
Consolidated EBITDA (revised from 2.5x) 2.5x
------------------------ --------------
Consolidated EBITDA to Consolidated Not less than 3.0x Not less than
Net Finance Charges (revised from 4.0x) 4.0x
------------------------ --------------
As part of the Rights Issue in June 2018, the Company requested
and was granted a waiver from the Lender group in respect of the
Consolidated EBITDA to Consolidated Net Finance Charges covenant
and the Consolidated Net Debt to Consolidated EBITDA covenants for
the 12 month measurement period to 30 June 2018 should a breach of
either or both of these covenants be anticipated. In the event of a
breach the existing Senior Lender Debt Facilities would remain
available to the Group.
Refer to the 'Financial Results' section within the CEO's Review
for discussion with regards to covenants.
b) US$650 million Senior Secured Second Lien Notes
During FY 2017, a wholly owned subsidiary of the Company, Petra
Diamonds US$ Treasury Plc, issued debt securities consisting of
US$650 million five-year senior secured second lien notes with a
maturity date of 01 May 2022 (the "2022 Notes"). The 2022 Notes
carried a coupon of 7.25% per annum, which is payable semi-annually
in arrears on 1 May and 1 November of each year. The 2022 Notes are
guaranteed by the Company and by the Petra Diamonds Group's
material subsidiaries and are secured on a second lien basis on the
assets of the Petra Diamonds Group's material subsidiaries.
Proceeds from the 2022 Notes were used to refinance the Petra
Diamonds Group existing US$300 million 8.25% senior secured second
lien notes due 31 May 2020, to repay certain bank facilities (refer
to a) above), and primarily to fund capital expansion projects.
Further details about the 2022 Notes (including security) will
be included in the FY 2018 Annual Report.
10. COMMITMENTS
As at 30 June 2018, the Company has committed to future capital
expenditure totalling US$24.4 million (30 June 2017: US$25.6
million), mainly comprising Cullinan US$16.9 million (30 June 2017:
US$6.8 million), Finsch US$6.3 million (30 June 2017: US$13.8
million), Koffiefontein US$1.2 million (30 June 2017: US$2.6
million), KEM JV US$nil (30 June 2017: US$1.9 million) and
Williamson US$nil (30 June 2017: US$0.5 million).
11. RELATED PARTY TRANSACTIONS
The Group's related party BEE partners, Kago Diamonds (Pty) Ltd
("Kago Diamonds") and Sedibeng Mining (Pty) Ltd ("Sedibeng
Mining"), and their gross interests in the mining operations of the
Group are disclosed in the table and 'Group restructuring'
paragraph below.
Mine Partner and respective Partner and respective
interest interest
as at 30 June 2018 as at 30 June 2017
(%) (%)
---------------- ----------------------- -----------------------
Finsch Kago Diamonds (14%) Kago Diamonds (14%)
Cullinan Kago Diamonds (14%) Kago Diamonds (14%)
Koffiefontein Kago Diamonds (14%) Kago Diamonds (14%)
Kimberley Ekapa Kago Diamonds (8.4%) Kago Diamonds (8.4%)
Mining JV Ekapa Mining (24.1%) Ekapa Mining (24.1%)
Helam Sedibeng Mining Sedibeng Mining
(26%) (26%)
The non-current loans receivable, non-current loans payable,
finance income and finance expense due from and due to the related
party BEE partners and other related parties are disclosed in the
table below:
1 July 2017 1 July 2016
US$ million - - 30 June
30 June 2017(3)
2018(3)
------------------------ ------------ ------------
Non-current receivable
Sedibeng Mining 0.9 1.0
Kago Diamonds(1 & 2) 26.2 11.8
Ekapa Mining(3) - 2.0
------------------------- ------------ ------------
27.1 14.8
------------------------ ------------ ------------
Non-current payable
Kago Diamonds(1& 2) 59.5 53.6
59.5 53.6
------------------------ ------------ ------------
Finance income
Kago Diamonds(1) 1.8 0.7
Ekapa Mining 0.2 0.2
------------------------- ------------ ------------
2.0 0.9
------------------------ ------------ ------------
Finance expense
Kago Diamonds 6.7 5.8
Ekapa Mining(3) 0.2 0.2
------------------------- ------------ ------------
6.9 6.0
------------------------ ------------ ------------
(1) Umnotho weSizwe Group (Pty) Ltd ("Umnotho"), holds a 16.34%
interest in Kago Diamonds. Mr Dippenaar is directly or indirectly a
beneficiary of a trust that is a shareholder in Umnotho.
(2) Included in non-current receivables and payables are amounts
advanced during the Year of US$13.4 million (30 June 2017: US$3.4
million).
(3) Additionally, included in current trade and other
receivables and current trade and other payables are amounts
of:
- US$nil (30 June 2017: US$10.6 million) receivable from and
US$nil (30 June 2017: US$nil) payable to Ekapa Mining (Pty) Ltd
relating to working capital loans with the Group. The Ekapa Mining
(Pty) Ltd receivable had no value attributable to it as part of the
proposed KEM JV sale proceeds and was therefore reduced from
US$15.7m to US$nil.
Kago Diamonds is one of the BEE partners which obtained bank
financing from ABSA, RMB and Investec (the "BEE Lenders") to
acquire its interests in Finsch and Cullinan. The Group has
provided a guarantee to the BEE Lenders for repayment of loans
advanced by to the Group's BEE Partners (refer to note 12 for
further detail).
Rental income receivable
The Group received US$nil (30 June 2017: US$nil) of rental
income from Pella Resources Ltd and US$0.4 million (30 June 2017:
US$0.3 million) from Alufer Mining Ltd. The Group has US$0.3
million (30 June 2017: US$0.3 million) receivable from Pella
Resources Ltd and US$0.4 million (30 June 2017: US$0.1 million)
receivable from Alufer Mining Ltd, both companies of which Mr
Pouroulis is a director.
Group restructuring
On 1 July 2016, the Company completed the restructuring of the
Group and its BEE Partner structures, allowing for a simplified
Group structure. The IPDET now owns a 12% interest in each of the
Group's South African operations, with Petra's commercial BEE
Partners holding the remaining 14% interest through their
respective shareholdings in Kago Diamonds, in which Petra has a
31.46% interest. The effect of the restructuring for shareholders
at 1 July 2016 was an increase in the equity attributable to the
shareholders of the Company as the non-controlling interest in the
underlying net assets of the operations decreased by US$1.4
million. This decrease reflects the non-controlling interest's
increased share of cumulative profits at Finsch, a reduction in the
share of the cumulative profits at Cullinan and an increased share
of cumulative losses at Kimberley Underground, Koffiefontein and
Helam. The increase of US$1.4 million, attributable to the Group's
shareholders, excludes the effect of the KEM JV transaction in note
15. The effective interest percentages attributable to the Group's
shareholders are disclosed in the table below:
Resultant Group's Resultant Group's
effective interest effective interest
Mine % - Pre restructuring % - Post restructuring
------------------------------- ---------------------- -----------------------
Finsch 82.38 78.4
Cullinan 77.03 78.4
Koffiefontein 81.39 78.4
Kimberley Underground / KEM JV 86.80 58.3(1)
Helam 86.80 74.0
------------------------------- ---------------------- -----------------------
(1)The 58.3% effective interest in KEM JV post restructuring
reflects both the Group's interest in KEM JV following the
transaction in note 15 and the impact of the BEE restructuring.
12. BEE LOANS RECEIVABLE AND PAYABLE
US$ million 30 June 2018 30 June 2017
----------------------------- --------------- ---------------
Non-current assets
Loans and other receivables 64.7 35.0
Non-current liabilities
Trade and other payables 110.5 99.5
BEE Loans Receivable
The non-current BEE loans receivable represents those amounts
receivable from the Group's BEE partners (Kago Diamonds, Sedibeng
Mining and the IPDET) in respect of financing their interests in
the KEM JV(the BEE receivable of KEM JV will still be due to the
Group subsequent to the KEM JV disposal) and Koffiefontein mines,
advances provided to the BEE partners to enable the BEE partners to
discharge interest and capital commitments under the BEE Lender
facilities (refer below guarantee provided by the Company) and
other advances to the BEE partners which have enabled the BEE to
make distributions to their beneficiaries (Petra directors do not
qualify as beneficiaries under the IPDET Trust Deed).
As a result of delays in the Cullinan plant ramp-up and the
Finsch SLC ramp-up, the Group has elected to advance the BEE
partners funds using Group treasury to enable the BEE partners to
service their interest and capital commitments under the BEE Lender
facilities (refer below). As a result the BEE loans receivable due
to Petra have increased. The BEE partners are also required to
settle future interest and capital repayments under the BEE Lender
facilities and Petra may, at its discretion, elect to advance the
BEE partners funds to enable the BEE partners to service those
future interest and capital commitments. These loan advances will
be recoverable from the BEE's share of future cashflows from the
underlying mining operations.
US$ million 30 June 2018 30 June 2017
---------------------------------------------- --------------- ---------------
As at 1 July 35.0 28.8
Foreign exchange movement on opening balance (3.7) 3.6
Discretionary advance - capital and interest
commitment (BEE Lender facility) 24.3 -
Discretionary advance - distributions to
beneficiaries 6.7 9.2
Interest receivable 2.4 1.2
Restructuring of BEE partner structures and
reclassification - (7.8)
----------------------------------------------- --------------- ---------------
As at 30 June 64.7 35.0
----------------------------------------------- --------------- ---------------
BEE loans payable
BEE loans payable represent those loans advanced by the BEE
partners to the Group to acquire their interest in Finsch and
Cullinan. Details of the movements are set out below.
US$ million 30 June 2018 30 June 2017
---------------------------------------------- --------------- ---------------
As at 1 July 99.5 84.6
Foreign exchange movement on opening balance (1.5) 10.6
Interest payable 12.5 10.8
Restructuring of BEE partner structures and
reclassification - (6.5)
----------------------------------------------- --------------- ---------------
As at 30 June 110.5 99.5
----------------------------------------------- --------------- ---------------
Group guarantee provided to BEE Lenders
The BEE partners obtained bank financing from ABSA, RMB and
Investec (the "BEE Lenders") to refinance amounts owing by the BEE
partners to Petra, which had provided funding to the BEE partners
to enable them to acquire their interests in Finsch and Cullinan.
As part of the refinancing the Group provided a guarantee to the
BEE Lenders over the repayment of loans advanced to the Group's BEE
partners. The BEE partners will settle their loan obligations with
the BEE Lenders from their share of future operational cashflows,
either through repayment of the amounts owing to the BEE partners
by Petra or through recoverable advances provided by Petra from
Group treasury.
As at 30 June 2018 the BEE lender facility for which Petra
stands surety was US$85.9 million (30 June 2017: US$104.7 million)
with interest and capital commitments as detailed below:
US$ million Interest repayments Capital repayments Balance
------------------------ -------------------- ------------------- --------
BEE Lender facility as
at 30 June 2018 85.9
Due and payable within
12 months (9.9) (29.9) (39.8)
------------------------- -------------------- ------------------- --------
Due and payable in 1 -
2 years 46.1
------------------------- -------------------- ------------------- --------
The BEE Lender facility forms part of Petra's Consolidated Net
Debt for Petra's covenant measurement purposes and is subject to
the same covenant requirements (refer to note 9 for further
detail).
The BEE Lender facility bears interest at SA JIBAR plus 6.5%, is
repayable in bi-annual instalments (capital plus interest) in
November and May with a final repayment date in May 2020. The
probability of repayment default by the BEE Partners to Absa,
Investec and RMB and any subsequent call by the Lender Group on the
guarantee provided by Petra is considered remote.
13. EARNINGS PER SHARE
Continuing Discontinued (Restated) (Restated) (Restated)
operations operations Total Continuing Discontinued Total
30 June 2018 30 June 2018 30 June 2018 operations operations 30 June 2017
US$ US$ US$ 30 June 2017 30 June 2017 US$
US$ US$
Numerator
(Loss) / profit for
the Year (84,562,428) (82,312,465) (166,874,893) 18,315,283 14,914 18,330,197
--------------------- -------------- -------------- --------------- -------------- -------------- --------------
Denominator
Shares Shares Shares Shares Shares Shares
Weighted average
number of ordinary
shares used in basic
EPS
Brought forward 531,986,218 531,986,218 531,986,218 524,172,967 524,172,967 524,172,967
Effect of shares
issued during the
Year 1,248,794 1,248,794 1,248,794 4,397,609 4,397,609 4,397,609
Effect of FY 2018
Rights issue on
prior Year - - - 53,996,512 53,996,512 53,996,512
-------------- -------------- --------------- -------------- -------------- --------------
Carried forward 533,235,012 533,235,012 533,235,012 582,567,088 582,567,088 582,567,088
-------------- -------------- --------------- -------------- -------------- --------------
Shares Shares Shares Shares Shares Shares
Dilutive effect of
potential ordinary
shares 2,011,279 - 2,011,279 5,904,758 - 5,904,758
--------------------- -------------- -------------- --------------- -------------- -------------- --------------
Weighted average
number of ordinary
shares in issue
used in diluted EPS 535,246,291 533,235,012 535,246,291 588,471,846 582,567,088 588,471,846
--------------------- -------------- -------------- --------------- -------------- -------------- --------------
US$ cents US$ cents US$ cents US$ cents US$ cents US$ cents
-------------- -------------- --------------- -------------- -------------- --------------
Basic (loss) /
profit per share -
US$ cents (15.85) (15.44) (31.29) 3.14 - 3.14
Diluted (loss) /
profit per share
- US$ cents (15.85) (15.44) (31.29) 3.11 - 3.11
Due to the loss for the Year, the diluted loss per share is the
same as the basic loss per share. The number of potentially
dilutive ordinary shares, in respect of employee share options,
Executive Director and Senior Management share award schemes is
2,011,279 (30 June 2017: 5,904,758). These potentially dilutive
ordinary shares may have a dilutive effect on future earnings per
share.
The prior year basic and diluted profit per share have been
restated and adjusted by the bonus factor of 1.10 to reflect the
bonus element of the June 2018 Rights Issue, in accordance with IAS
33 Earning per Share. Amounts as originally stated were 3.46 cents
basic and 3.43 cents dilutive profit per share.
14. ADJUSTED EARNINGS PER SHARE (non-GAAP measure)
In order to show earnings per share from operating activities on
a consistent basis, an adjusted earnings per share is presented
which excludes certain items as set out below. It is emphasised
that the adjusted earnings per share is a non-GAAP measure. The
Petra Board considers the adjusted earnings per share to better
reflect the underlying performance of the Group. The Company's
definition of adjusted earnings per share may not be comparable to
other similarly titled measures reported by other companies.
Continuing Discontinued (Restated) (Restated) (Restated)
operations operations Total Continuing Discontinued Total
30 June 2018 30 June 2018 30 June 2018 operations operations 30 June 2017
US$ US$ US$ 30 June 2017 30 June 2017 US$
US$ US$
Numerator
(Loss) / profit for
the Year (84,562,428) (83,312,465) (166,874,893) 18,315,283 14,914 18,330,197
-------------- -------------- --------------- -------------- -------------- --------------
Net unrealised
foreign exchange
loss
/ (gain) 26,233,603 - 26,233,603 (8,608,330) (1,299,850) (9,908,180)
Impairment charge* 54,232,200 67,306,108 121,538,308 - - -
Taxation charge on
reduction of
unutilised
Capex benefits* 6,736,719 - 6,736,719 - - -
Kimberley Ekapa
Mining JV fair
value
adjustment - - - - (4,140,552) (4,140,552)
Bond redemption
premium and
accelerated
unamortised bond
costs - - - 22,347,670 - 22,347,670
--------------------- -------------- -------------- --------------- -------------- -------------- --------------
Adjusted profit for
the Year
attributable
to parent 2,640,094 (15,006,357) (12,366,263) 32,054,623 (5,425,468) 26,629,155
--------------------- -------------- -------------- --------------- -------------- -------------- --------------
*Portion
attributable to
equity shareholders
of the Company
Denominator
Shares Shares Shares Shares Shares Shares
Weighted average
number of ordinary
shares used in basic
EPS
As at 1 July 531,986,218 531,986,218 531,986,218 524,172,967 524,172,967 524,172,967
Effect of shares
issued during the
Year 1,248,794 1,248,794 1,248,794 4,397,609 4,397,609 4,397,609
Effect of FY 2018
Rights issue on
prior Year - - - 53,996,512 53,996,512 53,996,512
-------------- -------------- --------------- -------------- -------------- --------------
Carried forward 533,235,012 533,235,012 533,235,012 582,567,088 582,567,088 582,567,088
Shares Shares Shares Shares Shares Shares
Dilutive effect of
potential ordinary
shares 2,011,279 - 2,011,279 5,904,758 - 5,904,758
--------------------- -------------- -------------- --------------- -------------- -------------- --------------
Weighted average
number of ordinary
shares in issue
used in diluted EPS 535,246,291 533,235,012 535,246,291 588,471,846 582,567,088 588,471,846
--------------------- -------------- -------------- --------------- -------------- -------------- --------------
US$ cents US$ cents US$ cents US$ cents US$ cents US$ cents
-------------- -------------- --------------- -------------- -------------- --------------
Adjusted basic
(loss) / profit per
share - US$ cents 0.50 (2.81) (2.32) 5.50 (0.93) 4.57
Adjusted diluted
(loss) / profit
per share - US$
cents 0.49 (2.81) (2.32) 5.45 (0.93) 4.52
The prior year basic and diluted profit per share have been
restated and adjusted by the bonus factor of 1.10 to reflect the
bonus element of the June 2018 Rights Issue, in accordance with IAS
33 Earning per Share. Amounts as originally stated were 5.03 cents
basic and 4.98 cents dilutive profit per share.
15. ACQUISITION
Kimberley Ekapa Mining Joint Venture (30 June 2017)
On 8 July 2016, Petra and Ekapa Mining entered into a joint
venture agreement (effective 1 July 2016) to combine the operations
they owned in the Kimberley area into an unincorporated joint
venture named the Kimberley Ekapa Mining Joint Venture ("KEM JV").
The operations contributed by the joint venture partners are
detailed below. Petra has joint control of the KEM JV under the
terms of the shareholders' agreements and recognise its share of
revenue, costs, assets and liabilities.
The operations owned and operated by the joint venture partners
comprise:
- Kimberley Underground mines (via Petra's subsidiary Crown
Resources (Pty) Ltd) ("Crown Resources"). At 30 June 2016, 24.1% of
the Kimberley Underground mines (being Ekapa Mining's effective
interest in the newly formed joint venture) were classified as held
for sale in the Statement of Financial Position in accordance with
IFRS 5;
- Tailings operations (via Ekapa Mining's subsidiaries, Super
Stone and Kimberley Miners Forum (Pty) Ltd); and
- Kimberley Mines tailings operations (via Ekapa Minerals, owned
50.1% Ekapa Mining and 49.9% Petra).
Prior to the transaction, Petra controlled and consolidated
Kimberley Underground mines with a non-controlling interest shown
separately and Petra also held a 49.9% jointly controlled interest
in the Kimberley Mines tailings operations.
Subsequent to the transaction, Petra and its BEE Partners have a
75.9% jointly controlled interest in KEM JV, held through Crown
Resources and Ekapa Minerals, with Ekapa Mining owning the
remaining 24.1%. Petra and its BEE Partners effectively contributed
24.1% of their interest in Kimberley Underground mines in return
for a 75.9% interest in the tailings operations contributed by
Super Stone and Kimberley Miners Forum (Pty) Ltd and a 26% increase
in the interest in the Kimberley Mines tailings operation.
Effect of the transaction
The transaction had the following effect on the Group's assets
and liabilities:
Summary of net fair value gain recognised
US$ million Table Fair values
---------------------------------------------------- ------- ------------
Fair value uplift for 26% incremental interest
in Ekapa Minerals a) 2.2
Fair value uplift for 75.9% interest in Super
Stone b) 8.5
Derecognition of 24.1% net book value of Kimberley
Underground Mines c) (6.6)
---------------------------------------------------- ------- ------------
Net fair value gain recognised in the consolidated
income statement (refer to note 17) 4.1
------------------------------------------------------------- ------------
a) Ekapa Minerals
Book values Fair value Fair values
US$ million adjustments
---------------------------------------- ------------ ------------- ------------
Mining property, plant and equipment 18.9 - 18.9
Mineral property - 3.7 3.7
Cash and cash equivalents, inventory
and trade and other receivables 6.9 - 6.9
Environmental liabilities and trade
and other payables (21.0) - (21.0)
---------------------------------------- ------------ ------------- ------------
Net assets at 1 July 2016 4.8 3.7 8.5
---------------------------------------- ------------ ------------- ------------
Recognition of Petra's 26% incremental
interest in Ekapa Minerals 1.2 1.0 2.2
---------------------------------------- ------------ ------------- ------------
b) Super Stone
Book values Fair value Fair values
US$ million adjustments
--------------------------------------- ------------ ------------- ------------
Mining property, plant and equipment 7.4 - 7.4
Mineral property 2.0 0.9 2.9
Cash and cash equivalents, inventory
and trade and other receivables 2.5 - 2.5
Environmental liabilities and trade
and other payables (1.6) - (1.6)
--------------------------------------- ------------ ------------- ------------
Net assets at 1 July 2016 10.3 0.9 11.2
--------------------------------------- ------------ ------------- ------------
Recognition of Petra's 75.9% interest
in Super Stone 7.8 0.7 8.5
--------------------------------------- ------------ ------------- ------------
c) Kimberley Underground Mines
Book values
US$ million
---------------------------------------------------- ------------
Partial disposal of 24.1% of Kimberley Underground
Mines (6.6)
---------------------------------------------------- ------------
The US$4.1 million gain recorded on the formation of KEM JV
represents Petra's newly recognised incremental 26% share of the
fair value of Ekapa Minerals assets and liabilities and its 75.9%
share of the fair value of Super Stone's assets and liabilities,
less the 24.1% of the net book value assets and liabilities of
Kimberley Underground mine relinquished by Petra as part of the
transaction.
16. IMPAIRMENT CHARGE
The carrying amounts of the Group's assets are reviewed at each
reporting date to determine whether there is any indication of
impairment. If there is any indication that an asset may be
impaired, its recoverable amount is estimated. The recoverable
amount is the higher of value in use and fair value less cost to
sell.
Impaired continuing operations
Impairment indicators were identified at Koffiefontein and a
detailed impairment test was performed. The results of the
impairment tests performed are detailed below. For impairment
considerations at KEM JV refer to note 17.
Given the recent production volumes and costs, as well as
engineering and pricing challenges, indicators of impairment were
deemed to exist. Whilst conducting an impairment review of the
Koffiefontein assets using a value in use impairment model, the
Group exercises judgement in making assumptions about future
exchange rates, rough diamond prices, volumes of production, ore
reserves and resources included in the current life of mine ("LOM")
plans, feasibility studies, future development and production costs
and macro-economic factors such as inflation and discount
rates.
Impairment of property, plant and equipment was considered
appropriate given the outcome of the impairment review exercise and
the Group recognised a Consolidated Income Statement charge of
US$66.0 million, being management's estimate of value in use of the
Koffiefontein assets.
Koffiefontein
The key assumptions used in the Koffiefontein impairment review
are set out in the table below:
Key assumptions Explanation
LOM and recoverable Economically recoverable reserves and resources
value of reserves and are based on Management's expectations based
resources on the availability of reserves and resources
at Koffiefontein and technical studies undertaken
in-house and by third party specialists. Resources
remaining after the current LOM plans have not
been included in impairment testing for the
operations.
------------------------------------------------------
LOM - capital expenditure Management has estimated the timing and quantum
of the capital expenditure based on Koffiefontein's
current LOM plans. There is no inclusion of
capital expenditure to enhance the asset beyond
exploitation of the LOM plan orebody.
------------------------------------------------------
Diamond prices Diamond prices of US$543 per carat in FY 2019
rising to US$573 per carat in FY 2020 (reflecting
product mix and a short term price escalator)
used in the impairment test have been set with
reference to recent achieved pricing and market
trends, product mix as a result of increased
undiluted ore, increased volumes and diamond
price escalators. Diamond prices are increased
at a long-term diamond price escalator reflecting
the Group's assessment of market supply/demand
fundamentals post FY 2019 of 3.0% (30 June 2017:
4.0%) above a long-term US inflation rate of
2.5% (30 June 2017: 2.5%).
------------------------------------------------------
Discount rate A discount rate of 8.5% was used and was calculated
based on a nominal weighted cost of capital
including the effect of factors such as market
risk and country risk as at the Period end.
------------------------------------------------------
ROM An increase in ROM throughput of 76% for FY
2019 which takes account of the completion of
the SLC expansion project. The steady state
ore production has been reduced to reflect a
more conservative outlook compared to earlier
guidance.
------------------------------------------------------
Cost inflation rate Long-term South African inflation rate of ca.
7.5% (30 June 2017: ca. 7.5%) was used for Opex
and Capex escalators.
------------------------------------------------------
Exchange rates Exchange rates are estimated based on an assessment
of current market fundamentals and long-term
expectations. The US$/ZAR exchange rate range
used commenced at ZAR12.75 (30 June 2017: ZAR13.25),
further devaluing at 3.9% (30 June 2017: 3.5%)
per annum for a period of three years, reverting
to 3.4% per annum thereafter.
------------------------------------------------------
Valuation basis Discounted present value of future cashflows.
------------------------------------------------------
Sensitivity analysis:
The impairment charge recognised has been calculated on the
basis of management's best estimates, however any adverse change in
any of the above assumptions would lead to an additional impairment
charge. At Koffiefontein, Management consider that future
development of new areas below the current SLC, increased
production and expansion capital, exchange rates and diamond prices
are the most sensitive assumptions. For example, a 5% reduction in
carat production would result in a further impairment of US$7
million, a 5% strengthening of the South African Rand to the US
Dollar would result in a further impairment of US$7 million, a 5%
reduction in diamond prices would result in a further impairment of
US$8 million and a 5% increase in operating costs would result in a
breakeven NPV. To address the production sensitivities, management
is currently focusing on increasing the average tonnes per day
hoisted and undertaking a detailed Capex review which will also
determine whether the Group will access areas below current SLC in
the existing LOM plan; the outcomes of such reviews will be
assessed once completed.
Detail of the impairment assessment is shown below.
Impairment Asset class Carrying Impairment Carrying value
(US$ million) value pre post impairment
impairment
---------------- ----------------------------- ------------ ----------- -----------------
Koffiefontein Property, plant & equipment 118.2 66.0 52.2
Total 118.2 66.0 52.2
------------ ----------- -----------------
Non- impaired continuing operations
The Group performs impairment testing on an annual basis of all
operations and when there are potential indicators of impairment.
The results of the impairment testing performed did not result in
any impairments on the mining operations other than for
Koffiefontein as disclosed above. The key assumptions used in
determining the recoverable value calculations, determined on a
value in use basis, are listed in the table below:
Group assumptions:
Key assumptions Explanation
-------------------------- --------------------------------------------------------------
LOM and recoverable Economically recoverable reserves and resources are
value of reserves based on management's expectations based on the availability
and resources of reserves and resources at mine sites and technical
studies undertaken in house and by third party specialists.
Resources remaining after the current LOM plans have
not been included in impairment testing for the operations.
-------------------------- --------------------------------------------------------------
LOM - capital expenditure Management has estimated the timing and quantum of
the capital expenditure based on the Group's current
LOM plans for each operation. There is no inclusion
of capital expenditure to enhance the asset beyond
exploitation of the LOM plan orebody.
-------------------------- --------------------------------------------------------------
Diamond prices The diamond prices used in the impairment test have
been set with reference to recent achieved pricing
and market trends, and long-term diamond price escalators
reflect the Group's assessment of market supply/demand
fundamentals. A long-term inflation rate of 3.0%
(30 June 2017: 4.0%) above a long-term US inflation
rate of 2.5% (30 June 2017: 2.5%) per annum was used
for US$ diamond prices.
-------------------------- --------------------------------------------------------------
Discount rate A discount rate of 8.5% (30 June 2017: 9.0%) was
used for the South African operations and 9.0% (30
June 2017: 9.0%) for Williamson. Discount rates calculated
based on a nominal weighted cost of capital including
the effect of factors such as market risk and country
risk as at the Year end.
-------------------------- --------------------------------------------------------------
Cost inflation rate Long-term inflation rates of 3.5%-7.5% (30 June 2017:
3.5%-7.5%) above the long-term US$ inflation rate
were used for Opex and Capex escalators.
-------------------------- --------------------------------------------------------------
Exchange rates Exchange rates are estimated based on an assessment
of current market fundamentals and long-term expectations.
The US$/ZAR exchange rate range used, for all South
African operations, commenced at ZAR12.75 (30 June
2017: ZAR13.00), further devaluing at 3.9% (30 June
2017: 3.5%) per annum a period of three years, reverting
to 3.4% per annum thereafter.
-------------------------- --------------------------------------------------------------
Valuation basis Discounted present value of future cashflows.
-------------------------- --------------------------------------------------------------
Specific assumptions and sensitivity analysis
South African mines
At Cullinan specific assumptions were made in relation to grade
and pricing as production from the C-cut Phase 1 ramps up and
ongoing plant optimisation continues. At Finsch specific
assumptions were made in relation to the reduction in certain
operation costs such as outsourced services, automation of
processes and reduction in processing of tailings and overburden
dump material. The impact of applying sensitivities on the key
inputs is noted below:
Finsch Cullinan
headroom headroom
% %
--------------------------------------- ---------- ----------
Base case headroom 19% 24%
Increase in discount rate by 2% 6% 13%
Reduction in pricing by 5% 5% 14%
Reduction in short-term production by
10% 14% 19%
Increase in Opex by 5% 14% 19%
Williamson - Tanzania
At Williamson, the key judgement is around the recoverability of
the VAT receivable under the new legislation effective 20 July
2018. As detailed in note 2, Management consider the VAT to be
fully recoverable. However, if the VAT were not to be recoverable
the impact would be to reduce the base case headroom from 44% to
19%.
17 NON-CURRENT ASSETS HELD FOR SALE
a) KEM JV Assets held for sale
At Year end, the Group was in active negotiations to dispose of
the KEM JV operation and on 5 July 2018 entered into a binding
Heads of Agreement with regards to the disposal of the Company's
and its black economic empowerment ("BEE") partners' 75.9% interest
in the KEM JV to the Company's joint venture partner Ekapa Mining
(Pty) Ltd ("Ekapa Mining") for a gross cash consideration of ca.
ZAR300 million (US$18.6 million) (the "Disposal").
The Disposal will be on a going concern basis, with Ekapa Mining
taking on all of the Company's financial, employee, environmental,
health, safety and social obligations with regards to the KEM JV
operation. The ca. ZAR300 million gross purchase consideration will
be payable in 24 monthly instalments; 40% by way of equal
instalments paid over the period 1 January 2019 to 31 December 2019
and 60% by way of equal instalments paid over the period 1 January
2020 to 31 December 2020.
The rationale for the Disposal is to ensure a sustainable future
for KEM JV by placing the operation under the sole stewardship of
an operator best suited to maximise its value. Ekapa Mining's
extensive experience of operating specifically within Kimberley and
its ability to solely focus on these assets is expected to provide
the right fit for the operation, thereby ensuring continuation of
diamond mining employment and related economic activity in this
renowned diamond centre.
Completion of the Disposal will be subject to a number of
conditions, including:
-- approval by the South African Competition Commission;
-- Section 11 Ministerial consent in terms of the South African
Mineral and Petroleum Resources Development Act, 2002 in respect of
the underground mining operations;
-- the consent of Petra's South African lender group and the
release of relevant securities in relation to the KEM JV; and
-- the passing of resolutions approving the Disposal by the relevant boards.
The Disposal is expected to effectively complete in Petra's H1
FY 2019.
As a result of this transaction, the assets and liabilities of
the KEM JV mining operation (being Petra's effective of 75.9%
interest) have been classified as held for sale in the Statement of
Financial Position at 30 June 2018, in accordance with IFRS 5. The
financial results of the KEM JV for the Year have been disclosed in
the Consolidated Income Statement in Loss on discontinued
operation. The KEM JV mining operation is a separate operating
segment for the purposes of the Group's segmental reporting.
Effect of the transaction
The transaction had the following effect on the Group's assets
and liabilities:
i) Net assets:
Book value
prior to
reclassification Book value
as held for 30 June
US$ million sale Impairment 2018
----------------------------------------- ------------------ ----------- -----------
Mining property, plant and equipment 96.8 (77.0)(1) 19.8
Non-current trade and other receivables 1.9 (1.9) -
Trade and other receivables 25.8 (13.8) 12.0
Inventory 12.6 - 12.6
Cash and cash equivalents 1.4 - 1.4
----------------------------------------- ------------------ ----------- -----------
Non-current assets held for sale 138.5 (92.7) 45.8
----------------------------------------- ------------------ ----------- -----------
Environmental liabilities and other
non-current trade and other payables (14.2) - (14.2)
Trade and other payables (13.0) - (13.0)
----------------------------------------- ------------------ ----------- -----------
Non-current liabilities associated
with non-current assets held for sale (27.2) - (27.2)
----------------------------------------- ------------------ ----------- -----------
Net assets 18.6
----------------------------------------- ------------------ ----------- -----------
(1) This includes US$52.0 million impairment recognised in H1
FY2018 and US$4.2 million impairment of assets damaged in the
mudrush during H2 FY 2018.
ii) Result of discontinued operation:
01 July 2017 01 July
US$ million - 30 June 2016 - 30
2018 June 2017
------------------------------------------------- ------------- -----------
Revenue 81.6 82.3
Cost of sales (86.1) (83.9)
------------------------------------------------- ------------- -----------
Gross loss (4.5) (1.6)
Financial income 0.4 2.7
Financial expense (1.3) (1.7)
------------------------------------------------- ------------- -----------
Loss before tax (5.4) (0.6)
Income tax (charge) / credit (6.2) 1.1
------------------------------------------------- ------------- -----------
(Loss) / profit after tax before impairment
charge (11.6) 0.5
Kimberley Ekapa Mining JV fair value adjustment
(refer to note 15) - 4.1
Impairment charge (92.7) -
------------------------------------------------- ------------- -----------
Net (loss) / profit for the Year (104.3) 4.6
------------------------------------------------- ------------- -----------
The US$92.7 million impairment loss recorded on the KEM JV
assets represents the difference between the fair value of the
assets and liabilities and the consideration receivable upon the
proposed completion of the transaction. An impairment charge of
US$56.2 million was recognised in respect of assets written down to
carrying values in accordance with IAS 36 Impairment of assets.
This includes US$52.0 million impairment recognised in H1 FY2018
and US$4.2 million impairment of assets damaged in the mudrush
during H2 FY 2018.In addition, a further impairment charge of
US$36.5 million has been recognised to reduce assets of the KEM JV
to equal the fair value less costs to sell, being the fair value of
the consideration receivable. Upon completion of the transaction,
amounts included in the foreign currency translation reserve of
US$4.5 million in relation to KEM JV will be reclassified to the
Consolidated Income Statement and subject to the terms and
structure of the final disposal, the non-controlling interest will
be removed.
iii) The consolidated cashflow statement includes the following
amounts relating to discontinued operations:
01 July 2017 01 July
US$ million - 30 June 2016 - 30
2018 June 2017
---------------------------------------------- ------------- -----------
Operating activities (0.5) (9.4)
Investing activities (23.4) (36.0)
Net cash utilised in discontinued operations (0.6) (0.9)
b) Botswana (exploration)
During the Year, the Company took the decision to sell its
exploration assets held in Botswana and subsequently considered
from potential purchasers, offers to purchase its exploration
assets held in Botswana. As such, the assets and liabilities of the
Botswana exploration operation have been classified as held for
sale in the Statement of Financial Position at 30 June 2018, in
accordance with IFRS 5.
US$ million 30 June 2018
------------------------------------------------------------ -------------
Mining property, plant and equipment 0.6
Trade and other receivables 0.1
------------------------------------------------------------ -------------
Non-current assets held for sale 0.7
------------------------------------------------------------ -------------
Trade and other payables (0.6)
------------------------------------------------------------ -------------
Non-current liabilities associated with non-current assets
held for sale (0.6)
------------------------------------------------------------ -------------
Net assets 0.1
------------------------------------------------------------ -------------
18. POST BALANCE SHEET EVENTS
RCF and WCF settlement
On 09 July 2018, the Company settled its RCF loan (capital plus
interest) of US$73.1 million with its lending group.
On 13 July 2018, the Company settled its WCF loan (capital plus
interest) of US$33.6 million with its lending group.
As at date of this report, both the RCF and WCF remain
undrawn.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
(a) the preliminary financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union, and give a true and fair view of the
assets, liabilities, financial position and profit of the Group for
the Year; and
(b) the preliminary management report for the Year includes a
fair review of the information required by the FCA's Disclosure and
Transparency Rules (DTR 4.1.8 R and 4.1.9 R).
By order of the Board
Johan Dippenaar
Chief Executive Officer
17 September 2018
[1] Future Capex figures are provided in FY 2019 money term, at
an exchange rate of US$1:ZAR12.75
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR ZZLFFVKFBBBF
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